Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has revised its loan classification, provisioning and rescheduling policies aiming to ease the difficulties facing the country’s business community and bankers, officials said.
“The central bank has revised the provisions on loan classification, provisioning and rescheduling policies by taking into consideration recommendations of the business community and the bankers to ease their difficulties,” a senior official of the Bangladesh Bank (BB) said.
Under the revised provisions, the general provision against all unclassified loans of small and medium enterprises (SME) has been set at 0.25 percent from the existing 1.0 percent.
Besides, the base for provisioning has been re-fixed at minimum 15 percent of the outstanding balance of a loan from 20 percent.
“We’ve revised the provisions with some modifications while the timeframe for both loan classification and rescheduling of term loans remained unchanged,” another central banker said.
He also said a continuous loan would be classified over non-repayment within three months instead of the earlier fixed six months, while rescheduling would be limited to three times.
The revised provisions on loan classification and provisioning will come into effect from December 31 this year instead of September 30, 2012.
The banks, however, will have to submit reports on loan classification and provisioning during the July-September quarter to the department concerned by October 31 for the BB’s review.
The central bank issued two separate circulars in this connection on Sunday and asked the chief executives of scheduled banks to comply with the revised policies.
Under the revised provisions, the down-payment for the first time rescheduling of a term loan has been reduced to minimum 15 percent from at least 25 percent previously of the overdue installments or 10 percent of the total outstanding amount of a loan, whichever is less.
The down-payment for loan rescheduling second and third times remains unchanged as before, according to the circular.
The application for loan rescheduling second time will be considered upon receipt of cash payment of minimum 30 percent of the overdue installments or 20 percent of the total outstanding amount of a loan, whichever is less.
The application for loan rescheduling third time will be considered upon receiving cash payment of minimum 50 percent of the overdue installments or 30 percent of the total outstanding amount of the loan, whichever is less.
“Any loan, which is overdue for two months instead of the earlier-fixed three months, will go to the Special Mention Account (SMA),” the central banker said, adding that the loans in the SMA would not be treated as default loans.
The loans in the SMA will have to be reported to the Credit Information Bureau (CIB) of the Bangladesh Bank, according to the circular.
The BB asked the commercial banks to place the loans that remain overdue for a period of two months instead of three months or more in the SMA to ensure discipline in credit management in the banking sector.
“The bank will not be required to transfer funds under the SMA to the Interest Suspense Account by keeping 5.0 percent of the outstanding loan as provision,” the BB official noted.
He also said the time limit for rescheduling continuous, demand and fixed-term loans was also re-fixed.
“The revised provisions on loan classification, provisioning and rescheduling policies will help the commercial banks improve their profitability by the end of this calendar year,” the BB official said without elaborating.
BBN/SSR/AD-24Sept12-10:50 am (BST)
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