Repayment tenure for term loans extended by two years

The central bank yesterday eased the repayment facility for term loans for tens of thousands of borrowers, including industrialists and businesses to help them pay instalments at ease as the pandemic persists.

The move comes as the Bangladesh Bank said it was not going to extend the moratorium facility, introduced for all types of borrowers in April last year in response to the devastating crisis, to 2021.

Two top bankers hailed the Bangladesh Bank's step and said the relaxation in the repayment terms would help businesses recover smoothly and allow banks and financial institutions to realise loans.

Credits that carry a tenure of more than one year are considered as term loans.

As much as 70 per cent of the total outstanding loans amounting to Tk 10,63,626 crore were term loans as of September 30 last year, according to a BB official.

Clients will enjoy the relaxed facility based on the banker-customer relationship, the BB said in a notice.

The loan moratorium facility has not been extended, the central bank said. Now, the instalments of the term loans that were scheduled to be paid last year will be added to the principal amount of borrowers.

This may create trouble for borrowers as the instalment size will get bigger. So, the central bank has extended the repayment period by two years, a BB official said.

Banks will be allowed to offer a 50 per cent extension in the repayment tenure, the BB said.

For instance, if a client has a remaining repayment period of one year to pay back an existing loan, it would get an additional six months.  

Borrowers can choose one of the two options: a maximum of two years in the repayment period or the 50 per cent extension of the remaining payback time, whichever is higher.

Clients that had not availed the moratorium facility last year are also eligible for the latest relaxed policy. Banks will have to follow the same rule for the loans granted under the stimulus packages.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the initiative would help clients make a smooth turnaround.

A good number of clients had not secured the moratorium facility, and they repaid the loans on time, he said.

The relaxed facility will be provided on the basis of the bank-customer relationship. So, lenders will extend the support to the borrowers who have been genuinely affected by the business slowdown, he said.

"This will help strengthen corporate governance in the financial industry as well," he said.

Emranul Huq, managing director of Dhaka Bank, said the central bank measure would help the economy make a faster recovery.