BB asks banks to follow loan disbursement rules

The Bangladesh Bank has asked all banks and non-banking financial institutions (NBFIs) to follow the proper rules while disbursing loans from the Tk 25,000 crore refinance scheme formed for the cottage, micro, small and medium enterprise (CMSME) sector.

The central bank’s SME & Special Programmes Department issued a circular in this regard on Wednesday.

The circular said the banking regulator observed that some banks and NBFIs had not followed the rules while lending working capital from the scheme.

Lenders have been disbursing such loans for a period of more than 12 months, which is not in line with the characteristics of the working capital loan, it said. In this situation, banks and NBFIs should follow the appropriate rules in this regard.

The circular said loans disbursed as working capital can be renewed, if necessary, and banks as well as NBFIs can apply to the Bangladesh Bank for renewal.

The Bangladesh Bank on July 19 last year unveiled the Tk 25,000 crore refinance scheme with a three-year tenure.

Borrowers are getting term loans and working capital loans at a maximum interest rate of 7 per cent under the scheme while lenders will receive funds at 2 per cent from the central bank.

Banks and NBFIs are disbursing loans under the scheme through branches or sub-branches or agent banking or mobile financial services (MFS).

The scheme was aimed at creating easy access to funds for CMSME entrepreneurs while the banking regulator said the fund size would be increased, if needed.

Defaulters will not be allowed to borrow under the scheme. Before lending, banks must ensure whether the clients have any default loans.

At least 75 per cent of the total loans under the scheme must be disbursed among the cottage, micro, and small entrepreneurs while the remaining 25 per cent should go to medium enterprises, said the central bank.

Besides, 70 per cent of the total loans should be distributed in the production and service sectors, and the remaining 30 per cent in trade.

The loans will have a maximum grace period of six months. However, the tenure will be a maximum of five years along with the grace period for term loans.