BB extends loan status classification to Sep 30 as it fears pandemic would ram on

The central bank has extended the deadline for loan status classification by banks further to September 30, as it now forecasts the economy would be enshrouded by the coronavirus-induced gloom for longer than it had imagined earlier.

Now, banks will have to maintain the same credit status of a borrower as on January 30 until the new deadline.

Banks, however, would be able to classify any loan if their situation improves, the Bangladesh Bank said in a notice yesterday to help businesses and industries operate in the adverse scenario brought on by the coronavirus pandemic.

Almost all of the sectors of the economy have been hit hard by the pandemic. As a result, many industries, services and businesses aren't able to run normal operations, the central bank said.

On March 19, less than two weeks after the government first reported the country's maiden coronavirus cases, the central bank asked lenders not to consider businesspeople as defaulters if they fail to repay instalments until June 30 this year.

It came after banks in April requested both the finance ministry and the central bank to push back the deadline for loan status classification to December 31 from June 30 as many borrowers are failing to pay instalments because of coronavirus-induced losses.

All instalments of the term loans, including agriculture and small credits and investment, between January 1 and September 30 would be considered as deferred. The instalment size and numbers would be re-fixed in October, the BB said. 

And the borrowers can't be called defaulters for the unpaid instalments, the BB notice said. Besides, banks can't impose any penalty or fees for the unpaid instalments for the January-September period. 

The financial health of banks is 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.

The government has unveiled various stimulus packages amounting to $103,117 crore, which is 3.7 per cent of the country's gross domestic product, to help people, businesses, entrepreneurs, farmers, industrialists and exporters counter the impact of the pandemic.

Of the packages, only Tk 3,000 crore would come from the government's coffer, while the rest would come from the central bank or the lenders themselves, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, on Sunday. 

The central bank has eased monetary policy and taken several steps to improve the liquidity position at banks.

The repo rate was lowered from 6 per cent to 5.75 per cent in March and later to 5.25 per cent on April 12.

The cash reserve ratio was initially reduced from 5 per cent to 4.5 per cent (daily-basis) and from 5.5 per cent to 5 per cent (bi-weekly basis), with a further reduction to 3.5 per cent and 4 per cent, respectively, from April 15.

The BB has raised the loan-deposit ratio and investment-deposit ratio by 2 percentage points to facilitate credit to the private sector and improve liquidity in the banking system.

As part of the stimulus packages, the central bank has injected Tk 73,000 crore in the banking system through the refinancing schemes and the cut in the CRR, BB Governor Fazle Kabir said on Friday.

So, the banking sector would not face problems in implementing the stimulus packages, he said, during the virtual post-budget media briefing.

There was Tk 113,000 crore additional liquidity in the banking sector as of April 30, after meeting the statutory liquidity ratio. There is another Tk 62,000 crore additional fund owing to the healthy reserve, the governor had said.

"The liquidity situation is very good."