Policy for banks slightly tightened

The Bangladesh Bank (BB) has slightly tightened its previously relaxed loan rescheduling policy for banks.

Banks will now be able to reschedule the defaulted loan for the fourth time if a borrower shows any valid reason for defaulting, the central bank said in a notice on Wednesday.

In line with the previous relaxed policy, banks could have rescheduled defaulted loans for a fourth time without seeking any valid reasons from the borrowers.

The BB notice said that the capital and interest of the rescheduled loans will have to be recovered in monthly or quarterly instalments.

But if the money is not recovered through six instalments, the rescheduled loans will then be classified as defaulted loans.

The BB on July 18 relaxed its non-performing loan (NPL) rescheduling policy, allowing loan defaulters to reschedule their defaulted loans by paying 2.5 to 4 per cent down payment of their entire NPL.

Earlier, this was 10-30 per cent.

Not only that, but the defaulters will also be able to apply for new loans following the rescheduling of the defaulted loans, as per the policy.

The defaulted loan repayment period has been extended to five to eight years, which was a maximum of two years earlier.

The policy for loan rescheduling had been announced to stabilise the financial sector and proper management of NPL, said the July 18 notice.