All the scheduled banks will have to keep additional 2.0 per cent special general provisioning instead of 1.0 per cent earlier against loans, which have enjoyed latest policy support of the central bank, officials said.
The banks are allowed to transfer interest earnings from such loans in their income accounts, according to a notification issued by the Bangladesh Bank (BB) on Tuesday.
Under the latest policy relaxation, the banks are barred from treating any loan as substandard if the borrowers paid 25 per cent of the dues for the months of January to December of the year 2021, even if the payment is made on the last working day of the calendar year under consideration.
The borrowers will be allowed to adjust the overdue amounts for the year 2021 by the end of the existing tenure of the loans, according to a notification issued by the central bank on August 26 this year.
"We've issued the notification aiming to improve shock absorbing capacity of the banks through strengthening their capital base," a BB senior official told the FE while explaining the main objective of the latest move.
"Such general provisioning has increased considering reopening of the economic activities across the country," the central banker explained.
The banks are also allowed to transfer 1.0 per cent provisioning, which were kept earlier, in their income accounts after adjustment of loans with cash recovery, it added.
In 2020, the banks were asked to keep additional 1.0 per cent general provisioning against loans, which have enjoyed deferral/ time extension facilities, instead of all unclassified loans earlier.
"It will help improve financial health of the banks," a senior executive of a leading private commercial bank told the FE while replying to a query.
