Like banks, NBFIs can now maintain loan status until Sep
The central bank has pushed back the deadline for loan status classification by non-bank finance institutions to 30 September, giving more breathing room to borrowers struggling to remain afloat because of the lengthy pandemic.
In March, considering the economical devastation triggered by the pandemic, the Bangladesh Bank eased rules on classifying loans, lease and advances for both banks and NBFIs, ordering them never to downgrade any loans up to June.
The deadline for banks was later extended to 30 September as the central bank forecast the economy will be enshrouded by the coronavirus-induced gloom for longer than it had imagined earlier.
Yesterday, BB extended the deadline for the 34 NBFIs aswell.
Due to coronavirus, borrowers aren't having the capacity to run their normal operations, the central bank said in a notice.
It ordered NBFIs to consider all instalments against long and short-term loans, leases and advances deferred between 1 January and 30 September.
The instalment size and numbers would need to be re-fixed in October, BB said.
The tenure of the loans would be rescheduled by pushing back the repayment period consistent with the quantity of instalments that would remain unpaid until 30 September.
The central bank also ordered the NBFIs to avoid charging any penalty or additional costs or commissions for the January-September period.
Banks and NBFIs must maintain the same credit score status of a borrower as on 30 January before new deadline.
"It is a positive move," said Arif Khan, chief executive officer of IDLC Finance, one of the top NBFIs in Bangladesh.
The clients who cannot repay instalments because of the pandemic aren't wilful defaulters. Rather, their businesses attended to a standstill as a result of among the worst crises in a century.
"If we label their loans classified, they might not have the ability to borrow from the financial sector."
Khan said it had been wise to give more time to borrowers so that they can keep businesses ready to go and pay wages and salaries to employees.
"All of us would need to give time to your clients this year. Otherwise, clients wouldn't normally survive," Khan added.
Mominul Islam, ceo of IPDC Finance, another top NBFI, echoed the same.
"Customers need concessions as of this critical time. This deferral would particularly be helpful for small and medium enterprises."
If customers are classified, they might not have the ability to secure funds from the government's stimulus packages, Islam said.
Some customers may still not have the ability to make a comeback despite the concessions, particularly those that had been weak even prior to the pandemic.
"So, financial institutions should take the necessary precautions and reserve more money in provisioning rather than showing profits."
IPDC Finance has set aside about Tk 30 crore, which is approximately half of the gains it made in the first half of 2020, for expected loan losses.
"We have done it remember the relaxation in loan classification because there wouldn't normally be relaxation later on plus some customers may default on their instalment payments," Islam added.
