Default loan rescheduling policy tightened

The Bangladesh Bank today slightly tightened its loan rescheduling policy of defaulted loans after facing criticism from different corners.

The loan rescheduling policy was relaxed grossly 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.

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

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

They will be allowed to transfer the unrealised interest to their income segment only after they realize 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 after realising the whole amount.

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

The BB has also given a big relaxation of rules on down payments which are required to be made by defaulters.

As per the rules, defaulters who took term loans would have to give 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.