Banks call for stretching loan classification deadline to Dec 31

Banks have requested both the finance ministry and the central bank to extend the deadline for loan status classification to December 31 from June 30 as many borrowers are failing to pay installments because of coronavirus-induced losses.

The businesses have been hit hard by the ongoing economic fallout, which drastically eroded their capacity to return loans on time, banks said during a virtual conference with Finance Minister AHM Mustafa Kamal yesterday.

On March 19, the central bank asked lenders not to consider businesspeople as defaulters if they fail to repay instalments until June 30 this year. Banks will have to maintain the same credit status of a borrower as of January 30 until June 30.

Banks have also urged the central bank to consider establishing a credit risk guarantee scheme for the lenders to protect the loans given under the recently announced stimulus packages.

Kamal asked banks to keep defaulted loans in control as the road to economic recovery would be challenging.

He emphasised putting a lid on banks' operating cost and reducing cost-income ratio, citing the examples of neighboring countries.

"Lenders should cut down unnecessary expenditures during this period as well," he said.

The central bank will provide all necessary policy support and guidance to keep the business community and the banking sector running, said Fazle Kabir, governor of the Bangladesh Bank.

The financial health of banks is now most crucial to the recovery of the economy from the impact of the coronavirus pandemic as there is no alternative source to support and inject money into the economy, said Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh.

The central bank's latest moves have helped banks manage funds efficiently despite higher withdrawal pressure on cash and a shrink in deposits in the aftermath of the coronavirus outbreak, he said.

He appreciated the central bank's move to cut repo rate by 75 basis points to 5.25 per cent from 6 per cent.