BB eases down payment rules for struggling borrowers

The Bangladesh Bank (BB) has allowed banks to facilitate the business recovery of struggling borrowers by easing down payment requirements and extending implementation deadlines under its policy support schemes.

The BB issued a circular in this regard yesterday, saying the decision was taken following applications from various banks and stakeholders seeking flexibility in implementing earlier policy instructions.

Senior bankers welcomed the decision, saying it could help distressed industries regain momentum. But they also warned that some wilful defaulters might try to exploit the softer terms.

Under the revised rules, eligible borrowers may now pay their required down payment in instalments. Half of the stipulated amount must be paid at the time of approval, with the remaining 50 percent due within six months of the effective date.

The BB also said that if policy support has already been approved but could not be implemented due to valid reasons, banks may extend the previously fixed deadline by up to three months. In addition, regarding interest-related issues, banks have been instructed to make decisions in line with existing policies, based on banker-customer relationships and applicable guidelines.

In January last year, the central bank formed a five-member committee, led by the executive director of the Department of Offsite Supervision, to provide necessary policy support for restructuring or rescheduling corporate borrowers who defaulted due to factors beyond their control.

The committee’s process of holding tripartite meetings with borrowing institutions or groups and financing institutions concluded on September 30 last year.

On September 16, the BB issued a unified special loan rescheduling policy to maintain economic growth and assist borrowers who had defaulted due to circumstances beyond their control.

About 300 companies, including top defaulter conglomerates, applied to the BB for loan rescheduling or restructuring facilities totalling around Tk 2 lakh crore in the first nine months of last year.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Ltd, said the flexibility by the BB may help sick industries recover and return to business in this tough time. The economy is going through stress, he said.

However, bankers cautioned that wilful defaulters may take advantage of the policy support extended to enable sick and affected firms to return to business. As the provision has become general, there is a risk that wilful defaulters and those who did not qualify earlier will receive the support.

Anis A Khan, a former chairman of the Association of Bankers, Bangladesh (ABB), said this would give breathing space to affected businesses to restore their production and services to normal levels after the formation of an elected government.

“It is imperative that businesses take this opportunity to rebuild their frayed infrastructure,” he said.