The central bank further relaxes its loan repayment policy


| Update:
Aug 28, 2021 7:40:25 PM

The central bank has further extended the easing of policy on repaying loans to banks planned by their borrowers to help recover the economy of the pandemic-stricken country, officials said.

Under the easing, borrowers would have a new chance to remain unclassified, if they repay at least 25 percent of the total outstanding loans for the entire calendar year within

On December 31, according to a notification released Friday by the Bangladesh Bank (BB).

In this case, the remaining 75% of loans outstanding from January 2021 to December 2021 would be payable within one year from the expiration date of the loans, he added.

“We have further relaxed the loan classification policy to help the country’s business community overcome the negative impact of the second wave of the pandemic on their businesses,” Abu Farah Md. Nasser, deputy governor of the country, told FE. the Bangladesh Bank (BB). while explaining the main purpose of the notification.

BB officials, however, said the central bank would issue a separate directive, on maintaining the provisioning against these loans, by the end of this year.

All borrowers are eligible for this loan repayment facility, if they repay a quarter of their outstanding loans by the deadline, officials said.

On June 27, the BB relaxed its policy, allowing borrowers a chance to remain unclassified, if they repay at least 20 percent of the total amount outstanding for the March and June quarters by August 31 on the basis of the “banker-client” relationship, following the resurgence of the Covid-19 epidemic.

Senior bankers have said, however, that BB’s latest policy easing will help curb the uptrend in non-performing loans (NPLs) by the end of this calendar year.

Speaking to FE, Syed Mahbubur Rahman, former chairman of the Bangladesh Bankers Association (ABB), said: “This will help prevent a further increase in classified loans in the country’s banking sector.”

“This will help keep NPLs at a reasonable level by the end of 2021,” Emranul Huq, Managing Director (MD) and CEO (CEO) of Dhaka Bank Limited told FE.

Huq also said that banks should step up their recovery efforts, given their customers’ cash flow.

The amount of loans classified in the banking sector increased by nearly 12% to reach Tk 992.05 billion as of June 30 from Tk 887.34 billion six months earlier, despite political support from the central bank.

The BB also offered a facility for classifying deferred loans from January 2020 to December 2020, given the negative impact of the Covid-19 pandemic on people and businesses.

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