The Bangladesh Bank has extended the loan repayment period for businesses that would have defaulted by June 30 if they did not pay instalments, by two more months to August 31.
According to the new deadline, loans by businesses will not be categorized as defaulted until August 31, if only 20% of the instalments due by June are paid.
So, borrowers will be able to avoid falling into the defaulted zone by repaying 20% of their loan instalments as of June, according to a notice issued by the central bank on Sunday.
The three categories of loans — term, demand, and working capital — will enjoy the lenient facility. Borrowers in the banking sector, except for credit card debt, will enjoy the extended facility, explained a bank official.
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Bangladesh Bank has relaxed its loan classification policy considering the adverse effects of the second wave of the pandemic on businesses.
According to the notice, if a customer owes interest from the year 2020, it can be paid in six quarterly instalments between March this year and June next year. At the same time, the interest that comes up till June 2022 will also be provided leniency and have to be paid through quarterly instalments.
In addition, Bangladesh Bank has provided the facility to repay the summons loan in eight quarterly instalments from March this year to December 2022. Working capital or ongoing loans which have already expired and have not been renewed will not default till June 2022 if only the interest is paid.
In a notice issued on March 24, the central bank outlined the repayment of loan instalments, including non-payment of interest, helping businesses to repay the outstanding instalments by June.
In March last year, the Bangladesh Bank declared a loan moratorium facility for the banking sector, which was effective throughout 2020.
FBCCI seeks till December 31 for businesses to repay loans
The extension on the loan moratorium facility comes following a letter that was sent to the finance minister, governor of Bangladesh Bank, and other concerned organizations from FBCCI, BGMEA, and BKMEA.
The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) has sought more time for businesses to repay loans.
Jasim Uddin, the new president of the apex body of traders, has sent a letter to the governor of Bangladesh Bank, requesting the extension of the loan-term facility till December 31 to prevent businesses from becoming defaulters.
According to FBCCI, most industries and businesses have not been able to repay their loan instalments on time due to disruptions induced by the second wave of the pandemic.
Although timely fiscal-policy support has been provided by the central bank to sustain economic shocks considering the adverse effects on the economy by the pandemic, the Bangladesh Bank needs to extend the loan-term facility, reads the letter.
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If the term of the facility provided by the central bank is not extended, most businesses will become unintentional defaulters, which will have a negative impact on the entire economy, including the banking sector.
So, FBCCI has urged the central bank to withhold the classification process till December 31 of all loans by industry and trade-related sectors of the country, to avoid a negative credit portfolio.
Borrowers had been provided this benefit last year due to the pandemic. Although some benefits have been offered this year as well, it is lower in contrast to last year.
The amount of non-performing loans (NPLs) of the banking sector increased by about Tk6,000 crore in the first three months of this year. As a result of this, default loans have increased to Tk95,085 crore — 8.7% of the total debt.
