Banks can show interest receivables for 2022 as income

Banks can show interest receivables for 2022 as income on their books on the term loans that have been given a relaxed repayment facility up to December, the central bank said yesterday.   

Interest Receivable

Interest receivable is the amount of interest that has been earned but has not yet been received in cash.

On December 18, the Bangladesh Bank relaxed its loan repayment policy, saying the real income of borrowers has fallen due to the severe impacts of the prolonged Russia-Ukraine war.

Thanks to the latest relaxation, borrowers will be allowed to avoid being classified as a defaulter if they clear 50 per cent of their instalments payable in the final quarter of 2022 instead of 75 per cent previously.

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At the time, the BB did not specify whether the interest receivables could be transferred to the income segment and provision has to be kept and if yes, by how much. 

The BB yesterday said banks can transfer the interest receivables on the term loans to their income sector after analysing the risks facing the recovery of such advances.  

The move has been taken to keep the foundation of banks solid and raise their shock-absorbing capacity, according to a notice. 

The interest receivables on the rescheduled and restructured loans or on the loans that have been given a one-time exit facility can't be shifted to the income segment if the interest is not realised in the form of cash.

Besides, an additional 2 per cent general provision has to be kept against the loans. This means banks will have to keep a total of 3 per cent provision against such loans from the existing 1 per cent.

Lenders will have to earmark an additional 1 per cent provision for the cottage, micro, small and medium enterprises. They usually keep a 0.25 per cent provision.

The provisions have to be transferred to the Special General Provision-Covid-19 sector and they can't be shifted to any other sector until further directive from the central bank.

The BB in the circular says that if the loans are fully repaid, banks can move the additional general provision to the income segment of their books at their own discretion. And when the classified loans are backed by a required specific provision, the additional general provision can be shifted to proper sectors. 

Term loans carry a repayment tenure of more than a year.

The latest extension came less than two weeks after the Federation of Bangladesh Chambers of Commerce and Industry pressed for a relaxed loan classification policy until June next year.