Loan rescheduling tightened slightly

Bangladesh Bank yesterday slightly tightened its loan rescheduling policy for defaulted loans after facing criticism from different corners. 

The loan rescheduling policy was substantially relaxed on July 18, allowing defaulters to repay their term loans over a period of six years to eight years. In contrast, it was previously nine months to two years.

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The BB in the latest circular said borrowers who reschedule their non-performing loans (NPLs) would become defaulters once again if they failed to repay instalments six months in row.

In addition, banks will not be allowed to transfer the interest amounts, which were imposed on NPLs, to their income books after rescheduling the delinquent loans.

They will be allowed to transfer the unrealised interest to their income segment only after they realise the funds from borrowers.

Lenders will not be permitted to transfer the provisioning amount kept against the defaulted loans after rescheduling those for the third and fourth times. The provisioning amount will be transferred to the income book of banks only after the whole amount has been realised.

A central bank official said the revision of the previous circular would help reduce the number of delinquent borrowers to some extent.

The BB has also relaxed by a large extent rules on down payments which are required to be made by defaulters. As per the rules, defaulters who took term loans would have to provide only 2.5 per cent to 6.5 per cent of their total NPLs while rescheduling their NPLs instead of the previous 10 per cent to 30 per cent.