Good borrowers to get honour, not rebate

The Bangladesh Bank on Thursday instructed banks to show respect to borrowers – who pay their instalments regularly – and not provide them with any rebate as they have been enjoying single-digit interest since April 1 this year.

"Now, lending rate is very low. It is an incentive for good borrowers. Earlier, a borrower had to pay 15 to 16 percent interest against loans. But now the interest rate is 9 percent," Abu Farah Md Naser, executive director of the central bank, told The Business Standard.

"Moreover, we offer honour to a borrower by identifying him or her good in our credit information bureau (CIB) report."  

As per the central bank's previous instruction issued on May 16 last year, at the end of September every year, the banks have to provide good borrowers with at least 10 percent rebate on interests they had paid for the last 12 months. 

But from now on, the banks have to select good borrowers at the end of December every year.

According to the central bank's new definition, businesses or individuals will be considered as good borrowers if they can achieve unclassified status (not default) for the last four quarters and the banks feel satisfied with their transactions.

If a borrower has multiple loan accounts, he or she has to maintain conditions as mentioned above for all the accounts to be considered as a good borrower.

A good borrower cannot have any default loan to any other banks in the borrower's own name and his or her institutions' names.

If a borrower has to reschedule default loans for the first time for a valid reason, and then he or she complies with the above conditions, he or she can be considered as a good borrower.

The banks have to report to the CIB about such a borrower as "standard-good borrower". They can even publish a booklet or a magazine with pictures and profiles of their good borrowers for three years and above. To honour good borrowers, the banks can arrange an annual programme of award-giving.

The instruction will be in effect immediately and all the previous instructions in this regard to be considered as discarded.

The Bangladesh Bank, for the first time in 2015, introduced incentives for good borrowers. That time the regulator instructed the banks to rebate 10 percent interest as there were widespread discussions about giving massive rescheduling and restructuring facilities to defaulters to regularise bad loans. 

But eventually, defaulters get their loan regularised with lower down payments, but the good borrowers had not received interest rebate facilities as expected.