Bangladesh Bank again extends loan repayment relaxation

The central bank on Wednesday extended again the policy relaxation involving loan repayments to the country's scheduled banks by their borrowers.

The borrowers would get three more months' time to repay their due loan instalments on the basis of banker-customer relationship because of the resurgence of the Covid-19, officials said.

Since January last year banks have stopped classifying loans in the event of failure to repay of loan instalments under instructions from the Bangladesh Bank (BB). Borrowers will be able to clear their instalments on continuous, demand and term loans by June 30 instead of March 2021 on the basis of banker-customer relationship, according to a notification, issued by the Bangladesh Bank (BB) on Wednesday.

Such loans would not be considered as classified, if the borrowers would repay their instalments within June 30, 2021 instead of March this year, it added.

The borrowers, particularly the good ones, might enjoy such relaxation, popularly known as deferral policy for loan classification, if the banks concerned allowed the customers, the officials added.

The BB's latest move came against the backdrop of the fresh surge in Covid-19 infections in different countries, including Bangladesh.

Besides, the upcoming Holy Ramadan and the Eid-ul-Fitr festival were considered for offering such policy relaxation on loan repayment, a senior official explained.

"We've relaxed the policy to help the businesses overcome the damaging effect of the second wave," the central banker told the FE while describing the main objective of the relaxation.

He also said the country's overall export earnings may be hampered in the coming months, as the second wave of the disease, which has hit the European countries. This might affect the demand for ready-made garment (RMG) products.

"Such relaxation will help the business entities to clear their employees' wages and festival bonus before the Eid festival," the central banker noted.

Under the policy of relaxation, unpaid interest for 2020 on continuous loans would have to be cleared in six quarterly instalments from March 2021 to June 2022.

Such continuous loans would not be considered as classified until June 2022, if the borrowers would clear unpaid interest on the loans with quarterly instalments, it added.

The loan accounts in which transactions may be made within certain limit and had an expiry date for full adjustment would be treated as continuous loan.

On the other hand, the borrowers were allowed to repay their demand loans covering both interest and principal amount within eight quarterly instalments from March 2021 to December 2022, the notification added.

The demand loans would not be treated as non-performing loans (NPLs) during the period under review, if the instalments would be paid as per requirements.

The loans that became repayable on demand by the bank would be treated as demand loan.

On January 31, the central bank eased the repayment facility for term loans to facilitate the borrowers pay instalments amid the pandemic.

All the scheduled banks were allowed to offer a 50 per cent extension in the repayment tenure, but the tenure would not exceed two years.

Under the relaxation, the borrowers might choose one of the two options: a maximum of two years in the repayment period or 50 per cent extension of the remaining payback time, whichever was higher.

The central bank had offered a deferral loan classification facility from January 2020 to December 2020, considering the adverse impact of the Covid-19 pandemic on people and businesses.

Managing director and chief executive officer (CEO) of a leading private commercial bank (PCB) welcomed the BB's latest move, saying that it was a good initiative considering the ongoing pandemic, both globally and domestically.

"It will help the customers, who are genuinely facing cash flow crunch," the senior banker told the FE.

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