Central bank extends loan repayment until 2022

Highlight

• In case of working capital, the borrower will not be considered defaulter till June 2022 if he regularly pays interest on the loan
• The borrowers will have time till December 2022 to repay the demand loan
• In case of term loans, the borrower will be allowed to pay deferred installments till 30 June this year
• These facilities do not apply to loans taken from the incentive packages.

The Bangladesh Bank has further relaxed repayments of loans taken as working capital to counter ongoing pandemic impacts, extending the time until June 2022 if the borrower regularly pays the interests.

The central bank has also eased repayments of term loans and demand loans.

Borrowers of demand loans will have time till December 2022 to repay. In case of term loans, a borrower will be allowed to pay deferred instalments till 30 June this year. The term loan facility will be available only on the basis of bank-customer relationship, said a circular from The central bank's Banking Regulation and Policy Department (BRPD) on Tuesday.

The new facility will be available only for loans that have not been repaid in instalments and have not been renewed for the last year under the facilities provided for the Covid-19 crisis. These facilities do not apply to loans taken from the incentive packages.

According to the circular, "The second wave of Covid-19 has started having a negative impact on the country's economy. Moreover, its impact on other countries of the world is increasing and exports are being harmed.

"In such a reality, this opportunity has been given to deal with the negative effects of Codiv-19 and to normalise the flow of credit in the banking sector," said the circular.

According to the circular, unpaid interest on the working capital whose terms were ended but not renewed last year, can be paid in six equal installments from March 2021 to June 2022.

In case of that loan, the interest accumulated till June 2022 can be paid in quarterly installments till 30 June, 2022. This type of loan will not default until that date.

On the other hand, the central bank has given time from March 2021 to December 2022 to repay the demand loan as there is no term for this loan.

Last year's demand loan has to be repaid in eight equal quarterly installments by December 2022. In this case also, the loan cannot be classified or defaulted till that time.

In the case of these two types of loans, if a customer fails to pay the installments on a quarterly basis, he will be considered defaulter from the time he is unable to pay the installments.

Meanwhile, the time period for repayment of the term loan was supposed to end on 31 March, but it has been extended for another three months till 30 June this year. The customer will not be a defaulter till that date.

Asked about the new facilities, former banker Anis A Khan told The Business Standard, "The facility was timely. This facility was needed amid the second wave of the Covid-19 in the European countries and America."

The managing director of a private bank also opined that the new facilities were needed as the Covid-19 situation in the country is deteriorating. Requesting anonymity, he said in the case of term loans, the facility provided on the basis of bank-customer relationship is justified.

At the end of 2020, the default loans in the banking sector stood at Tk88,779 crore, which was 7.66% of the total loans disbursed. At the end of 2019, the amount of defaulted loans was Tk94,331 crore, which was 9.32% of the total disbursed loan.