Banks can show interest receivables for this year as income on their books on the term loans that have been extended a relaxed repayment facility up to December, said Bangladesh Bank on Thursday.
Interest receivable is the amount of interest that has been earned but has not yet been received in cash.
On December 18, the Bangladesh Bank relaxed its loan repayment policy, saying the real income of borrowers has fallen due to the severe impacts of the prolonged Russia-Ukraine war.
Thanks to the relaxation, borrowers can avoid being classified as a defaulter if they clear 50% of their installments payable in the final quarter of 2022 instead of 75% previously.
At the time, the BB did not specify whether the interest receivables could be transferred to the income segment and provision has to be kept and if yes, by how much.
In a notice yesterday, the BB said banks can transfer the interest receivables on the term loans to their income sector after analyzing the risks facing the recovery of such advances.
The move has been taken to keep the foundation of banks solid and raise their shock-absorbing capacity, it said.
The interest receivables on the rescheduled and restructured loans or on the loans that have been given a one-time exit facility can't be shifted to the income segment if the interest is not realized in the form of cash.
Besides, an additional 2% general provision has to be kept against the loans.
This means banks will have to keep a total of 3% provision from the existing 1%.
Lenders will have to earmark an additional 1% provision for the cottage, micro, small and medium enterprises.
They usually keep a 0.25% provision for such borrowers.
The provisions have to be transferred to the Special General Provision-Covid-19 sector and they can't be shifted to any other sector until further directive from the central bank.
The BB circular says that if the loans are fully repaid, banks can move the additional general provision to the income segment of their books at their own discretion.
When the classified loans are backed by a required specific provision, the additional general provision can be shifted to proper sectors.
Term loans carry repayment tenure of more than a year.
The latest extension in the repayment period came less than two weeks after the Federation of Bangladesh Chambers of Commerce and Industry pressed for a relaxed loan classification policy until June next year.
Bad loans hit a record Tk134,396 crore in September, accounting for 9.36% of the total outstanding loans of Tk1,436,200 crore in the banking industry, BB data showed.
A year earlier, the ratio was 8.12%.
