Banks got into a last-minute race seeking permission from the central bank to allow rescheduling loans under special considerations to help avert further buildup of their classified loans, as the year draws to a close, officials said.
And the scrambles forced the central bank to operate today (Saturday) on the weekend under a special arrangement.
The commercial banks are trying to get approval from the Bangladesh Bank (BB) for their loan rescheduling to avert further swelling of their non-performing loans (NPLs).
Over the last few days, a good number of banks have rushed to the central bank to seek the BB green signal for rescheduling loans at the eleventh hour to manage higher profits in 2017 by downsizing the actual volume of classified loans, the sources said.
The central bank has already taken extra measures to provide approval for the rescheduling of loans to the banks concerned by December 31, according to officials.
As part of the moves, a section of Banking Regulation and Policy Department (BRPD) of the Bangladesh Bank (BB) will be opened today (Saturday) under a special arrangement to ease the extra pressure coming from the rescheduling of banks' outstanding loans.
Higher authorities of the BB earlier engaged extra workforce in the section to tackle substantial pressure on the rescheduling function.
"At least 100 cases for the rescheduling of loans were submitted to the central bank last week," a BB senior official told the FE Friday over phone.
Besides, around 150 loan-rescheduling cases had been submitted earlier to the BB, the official added.
"The central bank is considering giving approval for rescheduling loans to those who deposited at least 5.0 per cent as down payment against the total outstanding amount of the loans," the central banker explained.
Talking to the FE, another BB official said the central bank is giving approval for the rescheduling of loans on a case-to-case basis considering the overall satiation of the banks concerned as well as the borrowers.
"Such rescheduling helps in recovering a portion of the loans," the central banker said while replying to a query.
He also said: "We did not give any approval for rescheduling loans without depositing down payment by the borrowers concerned."
Echoing his views, Nurul Amin, former chairman of the Association of Bankers, Bangladesh (ABB), said such rescheduling would help in reducing the volume of NPLs.
"The loan recovery of banks will increase following such rescheduling. It will be positive if the rescheduled loans be functional," the senior banker explained.
Under the existing provisions, the down payment for the first-time rescheduling of a term loan has been fixed at minimum 15 per cent of the overdue instalments or 10 per cent of the total outstanding amount of a loan--whichever is less.
An application for loan rescheduling second time will be considered upon receipt of cash payment of minimum 30 per cent of the overdue instalments or 20 per cent of the total outstanding amount of a loan--whichever is less.
And application for loan rescheduling third time will be considered upon receiving cash payment of minimum 50 per cent of the overdue instalments or 30 per cent of the total outstanding amount of the loan, whichever is less.
The banks have had rescheduled their loans amounting to Tk 704.30 billion lying with troubled borrowers over the last five years, putting extra pressure on the country's banking sector.
"The rescheduling of loans has created extra stress on the banking system in recent times as this constitutes a significant part of the banks' total loan portfolio," said the BB said in its Financial Stability Report 2016.
Along with the over-leverage, poor due diligence, influenced lending, fraud and negligence in compliance with risk-management practices could be reasons for the rise in rescheduled loans, it added.
Syed Mahbubur Rahman, the newly-elected chairman of the Association of Banks, Bangladesh (ABB), said: "For different reasons business can face cash crunch and we as bankers need to analyse the reason and support, if it warrants."
And rescheduling is one such measure, he adds.
"But this needs to be done looking at the future cash flow that the business might generate and the BB has a guideline for this purpose. But we need to see that by rescheduling we shouldn't prolong the death," Mr. Rahman, also managing director and chief executive officer of Dhaka Bank Ltd, noted.
