It comes as a bounteous bail-in for big borrowers as the central bank liberally relaxes loan- rescheduling liabilities trying to facilitate overall business activities in Bangladesh amid global crunch, extending time and slashing costs.
Under the policy pats, time limit for first-and second- time rescheduling of term loans has been extended to six-eight years including grace period instead of previous nine to 24 months, according to a notification issued Monday by the Bangladesh Bank, days after a new BB governor took over.
In case of continuous and demand loans, time limit for first- and second- time rescheduling has been jacked up to 5-7 years, including grace period, from 6-18 months.
Besides, the borrowers are allowed to get their classified loans rescheduled for a fourth time instead of three times earlier for the sake of recovery of the bad loans, the notification explains.
Timeline for third-and fourth-time rescheduling of all types of loans is reduced by one year from the maximum timeframe set by the BB.
"We've relaxed the policy to facilitate country's overall business activities considering the ongoing Russia-Ukraine war as well as the Covid-19 pandemic," a top central banker told the FE while explaining the main objective of the notification.
Now all the scheduled banks are at liberty to reschedule loans without prior approval from the BB, the central banker adds.
Under the new provisions, the banks will have to settle the cases of loan rescheduling and restructuring upon approval by their board as well as executive committee on the basis of bank-client relationship.
In that case, there is no need to receive prior approval from the central bank, according to the notification.
However, time limit for the rescheduling of agriculture loans and micro-credit has been re-fixed at maximum three years instead of maximum two years.
Under the fresh provisions, the down-payment amount for the first- time and second-time rescheduling of a term loans has been cut down to minimum 2.5-4.5 per cent from 15-50 per cent previously of the overdue installments or 5.0-7.00 per cent of the total outstanding amount of a loan, whichever is less.
On the other hand, the down payment for the first-and second-time rescheduling of demand and current loans has been re-fixed at minimum 2.5-4.0 per cent instead of 5.0-15 per cent of the overdue installments.
The down payment for all types of loan rescheduling for third and fourth times will be up by 1.0 per cent.
Regarding loan restructuring, the maturity date may be extended by a period of time not exceeding 50 per cent instead of 25 per cent earlier of the current remaining time to maturity.
Compromised amount, which is applicable to receiving fresh loan after completing rescheduling process, has been slashed to 3.0 per cent from 15 per cent for general borrowers while exporters may be granted further credit facility on payment of 2.0 per cent of the outstanding balance instead of 7.5 per cent previously.
Talking to the FE, Md Nurul Amin, a former chairman of the Association of Bankers, Bangladesh (ABB), said such policy relaxations could help reduce the amount of non-performing loans (NPLs) in the country's banking sector for a short period.
But the senior banker apprehend that recovery of such loans will be difficult in future. "Such loans may turn into classified again."
The latest BB moves come against the backdrop of rising trend in the NPLs in the banking sector despite close monitoring of the central bank.
The amount of classified loans grew by 9.85 per cent to Tk 1,134.41 billion during the January-March period of 2022, from Tk 1,032.74 billion in the preceding quarter (Q4 of 2021).
"Definitely, it will help the stress customers. However, some customers will take the benefit of it," says Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited.
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