Dhaka, Bangladesh (BBN)– The central bank of Bangladesh on Thursday relaxed its loan classification and provisioning policies aiming to facilitate small businesses identified as ‘missing middle group,’ officials said.
Under the revised provisions, a fixed term loan amounting up to BDT 1.0 million will be classified for non-repayment within six months instead of three-month earlier.
“We’ve revised the provisions on loan classification and provisioning aiming to expedite financial inclusion through encouraging both banks and the business group,” a senior official of the Bangladesh Bank (BB), told BBN in Dhaka.
He also said the provisions on loan classification for the fixed term loan amounting to over BDT 1.0 million will remain unchanged.
“We expect that small manufacturers and service providers will be benefited from the revision of policies relating to loan classification and provisioning,” the central banker noted.
Loans except short-term agricultural and micro-credit in the ‘special mention account’ and ‘sub-standard’ will not be treated as defaulted loan in line with the Banking Companies Act, 1991.
However, fixed term loans amounting up to BDT 1.0 million in the ‘sub-standard’ category will also be treated as defaulted loan for the same purpose, the central bank said in a circular on Thursday.
“If any fixed term loan is repayable on monthly installment basis, the amount of installment(s) due within six months will be equal to the sum of six monthly installments. Similarly, if the loan is repayable on quarterly installment basis, the amount of installment(s) due within six months will be equal to the sum of 2 quarterly installments,” the BB said in its explanation.
The amendments have been made with a view to expediting the economic growth triggered by the comparatively small scale borrowers and promoting financial inclusion, the circular said.
BBN/SSR/AD-27DEc12-9:51 pm (BST)