Dhaka, Bangladesh (BBN)-The Bangladesh Bank Tuesday approved a policy under which borrowers of outstanding bank loans worth minimum Tk 5.0 billion can now take maximum 12 years to repay it.
Under the new loan restructuring policy, a single borrower or a group will be allowed to get restructured their loans individually or by forming consortium.
The policy was approved at a meeting of the board of directors of the Bangladesh Bank, the central bank of Bangladesh.
BB Governor Atiur Rahman chaired the meeting held at its headquarters in Dhaka, the capital of Bangladesh.
The interested borrowers will have to apply for such a recast of their loan portfolios by June 30 this year, according to the policy provisions.
"No borrower will be eligible for such restructuring facility if he or she is found involved in any forgery or malpractice," it is stated in the policy.
"No loans can be restructured more than once."
A restructured loan will be treated as special-mention account (SMA) maintaining 2.0 per cent of provisioning against such loans, it adds.
The borrowers will be allowed to repay their restructured term loans for maximum 12 years, while both restructured continuous and demand loans will be cleared in maximum six years.
Down payment will be paid at 2.0 per cent for restructured credits amounting to less than Tk 10 billion while 1.0 per cent down payment will be given for such loan amounting to maximum Tk 10 billion.
Any borrowers who have had their loans restructured will not be allowed to declare cash dividends for the first three years. They will receive new financing for 50 per cent of continuous and demand loans for their last sanction and 60 per cent for term loans until five years.
"The policy will help to increase the profitability of banks through reducing amounts of their classified loans," SK Sur Chowdhury, deputy governor of the BB, told reporters after the meeting.
He said the policy was formulated in the light of those of other countries, including India, Sri Lanka and the Philippines.
"The interest rate on the restructured loan will be fixed by the bank concerned. However, it will be 1.0 per cent higher than the bank's cost of fund," the deputy governor said on a query while explaining the policy.
After restructuring, if any borrower fails to repay two consecutive instalments of their loans, such facility will be cancelled.
Its fate will be decided as per the existing bankruptcy law, he added.
The central bank earlier had formed a seven-member technical committee, headed by BB General Manager SM Rabiul Hassan, to prepare the policy allowing loan rescheduling only if the business entities are hit by global or domestic shocks.
A BB senior official told reporters that the central bank will issue a circular in this connection within a couple of days.
"The policy will help to boost the country's business activities and employment generation," he said.
BBN/ASI/AD-28Jan15-12:55am (BST)