BB tightens loan rescheduling policy for NBFIs

The Bangladesh Bank has tightened the loan rescheduling policy for the country’s non-bank financial institutions, limiting the scope for rescheduling loans to three times amid soaring non-performing loans and the surfacing of irregularities in the NBFI sector.

To contain the irregularities and malpractices related to loan rescheduling, the central bank issued a master circular on Tuesday, barring the NBFIs from rescheduling any regular loans.

The BB said, ‘It was observed that the NBFIs were rescheduling term loans, home loan, short-term agriculture and small-scale loans, lease and investments repeatedly without considering the repayment capacity of the borrowers.’

The resetting of loan repayment tenure and non-compliance with loan rescheduling policy are hiding the actual loan recovery situation that has prompted the central bank to issue the fresh guideline on loan rescheduling, it said.

Setting the rescheduling scope at the highest three times, the central bank said that the borrowers, who would fail to repay debt even after rescheduling loans for three times, would be considered as habitual loan defaulters.

For term loans classified as substandard, the NBFIs are allowed to reschedule a loan for up to 48 months for the first time, the tenure would be 36 months for rescheduling for the second time and the tenure would be the highest 24 months for rescheduling for the third time.

For rescheduling a doubtful loan, the repayment tenure would be the highest 36 months, 24 months and 18 months in the first, second and third time respectively.

For rescheduling a bad loan, the NBFIs are allowed to extend the repayment tenure by up to 36 months, 24 months and 18 months for the first, second and third time respectively.

Non-payment for six months or two quarterly instalments would result in degradation of the rescheduled loans to the bad or loss criteria.

If any loans are rescheduled in violation of BB rules, the central bank would not allow any further rescheduling of loans.

For the expired short-term loans, the BB has allowed the NBFIs to reschedule loans for 12 months in the first time and another two terms of six months.

In the circular, the central bank has tightened rules for booking interest income of the rescheduled loans for the NBFIs. It has also tightened provisioning-related rules for the NBFIs.