The loan repayment period has been extended by Bangladesh Bank for businesses that would have defaulted by June 31 if they did not pay instalments, by additional two months to August 31.
Based on the new deadline, loans by businesses will not be categorized as defaulted until August 31, only if 20 per cent of the instalments is due by June are paid.
Thus, the borrowers will be exempted from falling into the defaulted zone by repaying 20 per cent of their loan instalments as of June, based on the notice issued by the Bangladesh Bank on June 27.
Term, demand and working capital, the 3 categories of loans, will enjoy the lenient facility. Borrowers in the banking sector, with the exception of credit card debt, will benefit from the extended facility, as explained by a bank official.
The loan classification policy has been relaxed by the central bank, taking into account the negative effects of the second wave of the pandemic on businesses.
Based on the notice, if a customer owes interest from the year 2020, it can now be paid in 6 quarterly instalments between March 2021 and June 2022. During the same time, the interest that comes up till June 2022 will also be provided leniency and have to be paid through quarterly instalments.
Additionally, the central bank has provided the facility to repay the summons loan in 8 quarterly instalments from March 2021 to December 2022. Working capital or ongoing loans which have already expired and have not been renewed will not default till June 2022 if only the interest is paid.
On March 24, a notice was issued, where the central bank highlighted the repayment of loan instalments, including non-payment of interest, assisting businesses to repay the outstanding instalments by June.
The Bangladesh Bank, in March 2020, declared a loan moratorium facility for the banking sector, which was effective all throughout 2020.
FBCCI seeks till December 31 for businesses to repay loans
The extension of the loan moratorium facility comes in the aftermath of a letter that was sent to the finance minister, governor of Bangladesh Bank, and other concerned organizations from FBCCI, BGMEA, and BKMEA.
More time was sought by the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) to repay the loans.
The new president of the apex body of traders, Jasim Uddin, has sent a letter to the governor of Bangladesh Bank, urging for the extension of the loan-term facility till December 31 to prevent businesses from becoming defaulters.
Based on FBCCI, the majority of the industries and businesses were not able to repay their loan instalments on time because of disruptions enforced by the second wave of the pandemic.
The letter also stated that even though timely fiscal-policy support has been provided by Bangladesh Bank to sustain economic shocks considering the negative impacts on the economy by the pandemic, the Bangladesh Bank still needs to extend the loan-term facility.
If the term of the facility provided by the central bank is not extended, most businesses will become unintentional defaulters, which will have a negative impact on the entire economy, including the banking sector.
So, FBCCI has urged the central bank to withhold the classification process till December 31 of all loans by industry and trade-related sectors of the country, to avoid a negative credit portfolio.
Borrowers had been provided with this benefit last year due to the pandemic. Although some benefits have been offered this year as well, it is lower in contrast to last year.
The amount of non-performing loans (NPLs) of the banking sector increased by about Tk 6,000 crore in the first 3 months of 2021. As a result of this, default loans have increased to Tk 95,085 crore, 8.7 per cent of the total debt.