Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has relaxed its loan classification, provisioning and rescheduling policies aiming to facilitate the country’s overall business activities, officials said.
The requirement of 5.0 percent provisioning on outstanding balance of loan under Special Mention Account (SMA) has been withdrawn and the rescheduling time has been re-fixed at six years instead of four-and-half-year earlier, according to the latest directives, issued by the Bangladesh Bank (BB) on Wednesday.

However, the general provisioning rates applicable to unclassified or standard loans will come under SMA.

The provisioning for unclassified loans will be applicable to the SMA and the rates of provisioning for small and medium enterprises (SME), consumer and housing financing, loans for professionals to set up business under consumer financing scheme, loan to brokerage houses, merchant banks, stock dealers and all other unclassified loans will continue at 0.25 percent, 5.0 percent, 2.0 percent and 1.0 percent respectively, according to a BB official.

“The banks will require to keep provisioning on Tk 5.0 billion less than the previous required amount for the same,” Deputy Governor of the BB SK Sur Chowdhury told reporters while explaining the main objective of the latest moves.

“We’ve adjusted the policies considering the country’s interest and not under any pressure,” Mr. Sur said, adding that the central bank has extended timeframe for loan rescheduling considering the country’s socio-economic situation.

The rate of provisioning for sub-standard, doubtful and bad/loss remain unchanged at 20 per cent, 50 per cent and 100 per cent respectively.

“Any loan, which is overdue for two months instead of the earlier-fixed three months, will go to the SMA,” the BB official said, adding that the loans in the SMA and sub-standard 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 BB, the central banker noted.

Under the existing provisions, any continuous loan will be classified as ‘sub-standard’ if it is past due/overdue for three months or beyond but less than six months.

It will be ‘doubtful’ if it is past due/overdue for six months or beyond but less than nine months while it will be ‘bad/loss’ if it is past due/overdue for nine months or beyond.

“The banks are now allowed to reschedule their non-performing loans for maximum three times requiring down payments and maintaining other rules and regulations,” the BB official said while replying to a query relating to rescheduling of loans.

In case of rescheduling of any classified short-term agricultural and micro-credit, six months may be added with following time-limit from the day after the expiry date/repayment date of last installment to determine the repayment schedule which will start from the date of rescheduling, according to the revised instructions.

BBN/SSR/AD-30May13-9:07 am (BST).