Policy on loan rescheduling relaxed for 6 months

The central bank has relaxed the loan rescheduling policy on a limited scale for the next six months to facilitate financing for the businesses, affected by the ongoing political unrest.

Under the relaxations, the Bangladesh Bank (BB) has allowed banks to reschedule loans by fixing their down payment and time limit for repayment on the basis of banker-customer relationship.

bbThe commercial banks have also been empowered to restructure their unclassified loans through re-fixing repayment schedule at a reasonable level.

The central bank issued a directive in this connection Monday, and asked the chief executive officers and managing directors of all the scheduled banks to follow the latest policy on loan rescheduling, reports the Financial Express (FE).

“But in all these cases, except small and medium enterprise (SME) and agriculture loans, the banks will have to obtain clearance from the central bank, following approval of their authorities concerned,” a senior BB official explained.

He also said such relaxation facility will remain in effect until June 30, 2014.

The BB relaxed the loan rescheduling policy after two separate meetings with the country’s top bankers, held in the central bank on the day with BB Deputy Governor S K Sur Chowdhury in the chair.

In the meetings, the banks sought policy support from the BB to keep their financial health amid the ongoing political turbulence.

“It’s a lifeline for the affected businesses. It’ll also provide fresh financing to them, so that they can continue their business activities,” Mr. Sur said while explaining the main objectives of the directive.

He also said it will also help the banks to enhance their profitability by the end of this calendar year (2013).

The central bank has taken the latest measures, as the country’s overall business activities almost came to a standstill, following frequent spells of blockade and shutdown in the recent months.

Talking to the FE, another BB official said the central bank’s latest steps would also help to curb the rising trend of default loans in the country’s banking sector in the coming months.

The amount of classified loans has marked a gradual rise throughout this calendar year, and reached Tk 567.20 billion in the third quarter (July-Sept), which was nearly 13 per cent of the total outstanding loans.

The amount of classified loans marked a rise of more than 8.0 per cent or Tk 44.10 billion in the July-September period of 2013 over that of the previous quarter.

It was Tk 523.09 billion in the second quarter (April-June), and Tk 510.20 billion in the first quarter (Jan-March), the BB data showed.

Earlier on December 18, the central bank relaxed for six months some provisions, including rescheduling of SME loan, for facilitating credit flow to the small and medium businessmen, affected by the prevailing political turmoil.