Dhaka, Bangladesh (BBN) – The amount of classified loans in the country’s banking system dropped by more than 5.0 percent in December last year following relaxation of the loan rescheduling policy.

The volume of classified loans came down to BDT 405.83 billion in December last, which was 8.93 percent of the total outstanding loans, from BDT 427.25 billion a year ago, according to the central bank statistics.

Earlier on December 23 last, the Bangladesh Bank (BB) relaxed the loan rescheduling policy on a limited scale for the next six months to facilitate financing for the businesses, affected by the political unrest.

Under the relaxations, the central bank has allowed the banks to reschedule loans by fixing their down payment and time limit for repayment on the basis of banker-customer relationship.

The commercial banks have also been empowered to restructure their unclassified loans through re-fixing repayment schedule at a reasonable level.
At the end of September last year, the amount reached BDT 567.20 billion as banks’ default loans shot up much due to political unrest, according to the BB officials.

The increase in default loans was mostly in the state-owned commercial banks and the borrowers from such banks took advantage of the relaxed rules to a large extent. As a result, the state banks’ default loans decreased in the last one year, but those at private, foreign and specialized banks marked a rise.

BBN/SSR/AD-18Feb14-8:38 am (BST)