BB is relaunching its relaxed loan repayment policy

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The central bank has resumed its policy of easing loan repayments to keep ongoing economic activities stable despite the long-term negative impact of the Covid-19 pandemic as well as the Russian-Ukrainian war, officials said. responsible.

Under the eased stances, large industry borrowers are allowed to repay their term loans, which went unclassified on April 1, in phases – 50% by April-June this calendar year, 60% by July -September and 75 percent in the last quarter of 2022 – without becoming defaulters.

For small and medium-sized craft enterprises (MSMEs), borrowers must repay 25% of their repayable loans in the second quarter, 30% in the third quarter and 40% in the last quarter of this year – to avoid falling into the category of defaulters, according to a notification – released by Bangladesh Bank (BB) on Wednesday evening.

Only term loans, which have a repayment period of more than one year, will be eligible for the new, relaxed classification rules, he added.

The remaining amount of the installments will have to be repaid in the same installments one year after the expiration of the loan period, according to the officials.

“We have tried to create a balance between banks and commercial entities for the benefit of the overall economy,” a senior BB official told FE on Thursday while explaining the main purpose of the notification.

The issue was discussed at the last bankers’ meeting, he added.

Additionally, in flood-affected areas – identified by the Ministry of Disaster Management and Relief, borrowers will not be declared defaulters even if they do not pay any installments between April and December 2022.

CMSME borrowers in affected areas will be required to repay 25% of their outstanding loans for the nine-month period of this calendar year.

Working capital loans – due April 1 this year – can be repaid by December 2022, he added.

The BB’s latest moves came after the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country’s top trade body, pushed for a relaxed loan repayment policy until December. .

On May 31, companies across the country called for a loan moratorium until December due to the “volatile” business mood around the world amid war in Europe and the resulting stalemate in the West. .

A delegation from FBCCI with a set of proposals, including suspending loan classification until the end of this calendar year, met with BB Governor Fazle Kabir that day.

Senior bankers, however, have opposed such a relaxed loan repayment policy, saying it would reduce the amount of graded loans for the time being, but eventually increase the amount of delinquent loans in the banking sector. .

“The business community has become strong in lobbying the government as well as regulators,” Md Nurul Amin, former chairman of the Bangladesh Bankers Association (BBA), told FE.

The Principal Banker also said, “This will help reduce the amount of delinquent loans for the time being. But in the long term, it will slow loan recovery and the amount of non-performing loans could increase further.”

Previously, the BB offered a deferred loan classification facility from January 2020 to December 2020, given the negative impact of the Covid-19 pandemic on people and businesses.

In 2021, borrowers were allowed to take a chance to remain unclassified, if they repaid at least 15% of their total outstanding loans for the entire calendar year by December 31, 2021.

The central bank only halted this support for the first quarter of 2022, as the intensity of the virus outbreak waned, paving the way for a strong rebound in the economy, before coming under war pressure. Russian-Ukrainian.

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