BB extends loan position classification to Sep 30 as it fears pandemic would ram on
The central bank has extended the deadline for mortgage loan status classification by banks further to September 30, since 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.
Banks, however, would be able to classify any mortgage if their situation improves, the Bangladesh Lender said in a find yesterday to greatly help businesses and industries operate in the adverse scenario due to the coronavirus pandemic.
The vast majority of the sectors of the economy have already been hit hard simply by the pandemic. Therefore, many industries, services and businesses aren't able to run normal functions, the central lender said.
On March 19, significantly less than two weeks following the government initial reported the country's maiden coronavirus situations, the central lender asked lenders never to consider businesspeople as defaulters if they neglect to repay instalments until June 30 this season.
It came after banking institutions in April requested both the finance ministry and the central lender to push back the deadline for mortgage loan position classification to December 31 from June 30 as much borrowers are failing woefully to pay instalments as a result of coronavirus-induced losses.
All instalments of the term loans, including agriculture and little credits and investment, somewhere between January 1 and September 30 will be regarded as deferred. The instalment size and figures would be re-fixed in October, the BB explained.
And the borrowers can't be called defaulters for the unpaid instalments, the BB notice said. Besides, banking institutions can't impose any penalty or costs for the unpaid instalments for the January-September period.
The financial health of banks is essential to the recovery of the economy from the impact of the coronavirus pandemic as there is no alternative source to aid and inject money into the economy.
The federal government has unveiled various stimulus packages amounting to $103,117 crore, which is 3.7 % of the country's gross household product, to greatly help people, businesses, business owners, farmers, industrialists and exporters counter the impact of the pandemic.
Of the deals, only Tk 3,000 crore would come from the government's coffer, as the rest would result from the central bank or lenders themselves, explained Ahsan H Mansur, executive director of the Plan Research Institute of Bangladesh, on Sunday.
The central bank has eased monetary policy and taken several steps to increase the liquidity position at banks.
The repo rate was lowered from 6 per cent to 5.75 % in March and down the road to 5.25 per cent on April 12.
The cash reserve ratio was initially reduced from 5 % to 4.5 per cent (daily-basis) and from 5.5 % to 5 % (bi-weekly basis), with an additional reduction to 3.5 % and 4 %, respectively, from April 15.
The BB has raised the loan-deposit ratio and investment-deposit ratio by 2 percentage points to facilitate credit to the private sector and improve liquidity in the banking system.
Within the stimulus plans, the central bank has injected Tk 73,000 crore in the banking system through the refinancing schemes and the trim in the CRR, BB Governor Fazle Kabir said on Friday.
Consequently, the banking sector wouldn't normally face problems found in implementing the stimulus plans, he said, through the virtual post-budget media briefing.
There is Tk 113,000 crore additional liquidity in the banking sector by April 30, immediately after meeting the statutory liquidity ratio. There is usually another Tk 62,000 crore additional fund due to the healthful reserve, the governor got said.
"The liquidity problem is great."
