Another breather for borrowers
Bangladesh Bank yesterday extended the deadline for loan status classification by banks further to December 31, as it now forecasts the economy will be enshrouded by the coronavirus-induced gloom for longer than it had imagined earlier.
Now, banks will need to maintain the same credit score status of a borrower as on January 30 before new deadline.
This is the third time extension of the loan moratorium facility for borrowers in attempts to permit them to tackle the ongoing economical hardship smoothly.
On March 19, significantly less than two weeks following the government first reported the country's maiden coronavirus cases, the central bank asked lenders never to consider businesspeople as defaulters if indeed they neglect to repay instalments until June 30 this season.
The moratorium facility was later extended on June 15 once more.
In its latest instructions, the central bank asked lenders never to treat the borrowers as installment defaulters aswell if clients fail to repay any installment of loans between your months of January and December.
The instalments will be looked at as deferred types and banks must reconstruct the loans from the inception of next year.
The same rules will be applicable for the borrowers, who have taken credit in the form of working capital or demand loans.
Banks will have to adapt their interest of demand loans and working capital to their principal amount.
Banks will be permitted to rebate interest to the borrowers, who've not taken the moratorium facility by repaying their installments promptly.
A good number of borrowers now repay their loans despite the central bank's facility, that is a good example for the financial sector, said MA Halim Chowdhury, managing director of Pubali Bank.
The central bank's instruction is highly time-befitting since it will help recover the economy from the ongoing monetary meltdown, he said.
More instructions will get to banks to keep up provision against the loans and just how much interest of the loans that are enjoying moratorium facility will be used in the income segment of lenders, the central bank stipulated in its notice.
According to the banking practice, interest of classified loans and different types of rescheduled loans can't be used in income segment of lenders.
Banks are permitted to transfer the interest of financing to income segment despite failing woefully to realise the interest from the loans.
But banks are instructed not to transfer the interest of the loans, that will become defaulted given the feeble trend of repayment.
This inflates the profit of a bank artificially, which also facilitates shareholders and directors in enjoying profits bypassing the banking norms.
"We must wait for another central bank's notice about how much fund will be transferred to income segment from the loans," said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
He, however, welcomed the central bank notice saying this would help both lenders and borrowers.
