BB further relaxes loan repayment policy for borrowers

Staff Reporter :
The Bangladesh Bank (BB) on Tuesday again extended the policy relaxation involving loan repayments to the country’s scheduled banks by their borrowers.
Now, borrowers will be allowed to avoid being classified as a defaulter if they clear 50 per cent of their installments payable in the final quarter of FY23, according to a circular of the central bank.
As a result borrowers who were at risk of defaulting can remain as regular by depositing half of the installment.This benefit will be available only in case of term loan.

Experts expressed their worries that the relaxed policy would deepen the liquidity stress in the banking sector as lenders will not get back the expected amount of funds from borrowers.
They also viewed that the central bank has offered this facility due to the fear that the amount of defaulted loans may increase further in the banking sector.
However, according to the circular the central bank takes this initiative because of the troubles faced by borrowers in the wake of the prolonged Russia-Ukraine war which exacerbatedthe price hike of the imported raw materials and shipments.

As per policy relaxation, borrowers in large industries would also be able to avoid falling into the default loan category by repaying half of the loans payable for the April-June period.
Bangladesh Bank has also said that in case of failure to pay the loan according to these instructions, these loans can be defaulted as per the rules.
Customers availing this facility will not be charged any penalty interest or additional fee on the facility loan from first of the April to 30th June on installment repayments.
Borrowers who have been cleared of default through rescheduling earlier will also get this loan repayment facility, as per BB circular.
Shariah-based banks will be able to offer same facilities following the same instructions in their investments.

The amount of interest or profit realised in cash against concessional loans or investments under this policy can be transferred to the income sector.
Meanwhile, according to the statistics of the central bank, defaulted loans are increasing consistently in the banking sector.
During the previous quarter (January-March), defaulted loans have increased by about Tk. 11,000 crore. As a result, the total amount of defaulted loans has increased to Tk 1.31 trillion at the end of last March this year.