Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has not changed the definition of defaulted borrower, saying that only after six months such a borrower will be identified as defaulter.
“The central bank has clarified the definition of defaulted borrower in line with the existing Bank Company Act,” a senior official of the Bangladesh Bank (BB) said, adding that the loan, classified as substandard will not be treated as defaulted one.
The central bank issued a circular clarifying definition of loan defaulters on Wednesday and asked the chief executives of all scheduled banks to take necessary measures for rescheduling such loans.
“The loan, classified as substandard, was earlier treated as defaulted loan,” the central banker said while replying to a query relating to substandard and defaulted loan.
The BB’s latest move came against the backdrop of public opinions about tenor of defaulted loan after circulars relating to loan classification, provisioning and rescheduling policies by the central bank was issued on June 14, 2012.
“There is no problem to provide fresh loan to the borrower whose loan has been identified as substandard,” the BB official said, adding that any loan will be classified as ‘substandard’ if it is due/overdue for three months or beyond but less than six months.
He also said it will be ‘doubtful’ if it is due/overdue for six months or beyond but less than nine months while it will be ‘bad/loss’ if it is due/overdue for nine months or beyond.
Besides, the BB earlier relaxed its loan classification and provisioning policies to facilitate small businesses, identified as ‘missing middle group,’ the central banker added.
Under the revised provisions, a fixed-term loan amounting up to Tk 1.0 million will be classified for non-repayment within six months instead of the previous three months.
The amendments have been made to expedite the economic growth, triggered by the comparatively small-scale borrowers, and promote financial inclusion, according to the central bankers.
“We’ve also redefined overdue loan with a view to determining defaulted borrower for the purpose of section 5(GaGa) of the Bank Company Act, 1991,” another central banker said.
Under the redefinition, any loan, if not repaid/renewed within the fixed time limit for repayment will be treated as ”overdue” from the following day of its expiry date.
Any demand loan, if not repaid within the fixed time limit for repayment or after the demand by the bank, will be treated as ”overdue” from the following day of the expiry date or demand date.
In case of any instalment(s) or part of instalment(s) of a fixed term loan is not repaid within the expiry date or due date, the amount of unpaid instalment(s) as well as the loan will be treated as ”overdue” from the following day of the expiry date or due date.
“The short-term agricultural loan or micro-credit, not repaid within the fixed time limit for repayment, will be considered ”overdue” after 06(six) months of the expiry date,” the BB said earlier in its circular.
BBN/SSR/AD-21Mar13-8:42 am (BST)
