Reuters :
Moody’s, the international credit rating agency, on Tuesday said they expected the tightening of overdue recognition for fixed-term loans to result in increases in nonperforming loans and provisions.
This, they believe, will strain banks’ profitability in the near term. They made the disclosure in a report released on Tuesday.
On 9 April, the Bangladesh Bank finally reinstated its loan classification rule of 2012 by cutting the overdue time of a term loan by three months in line with the international practice in response to the condition set by the International Monetary Fund (IMF) as part of a $4.7 billion loan package.
A term loan will be treated as overdue after three months of non-payment from fixed expiry date for repayment, down from existing six months, according to the Bangladesh Bank circular issued in this regard.
Besides, the classification period after the overdue timeframe has been kept unchanged at three months, which means a loan will be treated as default in six months after the fixed expiry date for repayment from existing nine months.
This will be the first phase of the new rule which will come into effect from 30 September 2024.