BB extends defaulted loan rescheduling tenure, eases fresh loan access

The Bangladesh Bank has extended the period for rescheduling defaulted loans with a nominal down payment for another 10 years, including a two-year grace period, until June, requiring a 2 percent down payment.

Earlier, through special rescheduling, defaulted loans worth Tk 87,298 crore were understated during the last three months of the previous year. The extension has therefore come amid criticism that authorities are reverting to the old practice of understating defaulted loans.

A directive to this effect was issued on Thursday and sent to all banks.

In the circular, Bangladesh Bank also extended the timeframe and allowed institutions that had received one-time exit facilities to obtain new loans. The previous directive barred such institutions from accessing any new loan facility until the rescheduled loan was fully repaid.

However, Thursday's directive stated that while no additional facility can be provided by the same bank beyond existing arrangements, these institutions may now obtain loans from other banks.

The circular further states that special rescheduling facilities can be provided to unclassified loans and loans that have defaulted by March in adverse terms until June 30. The application must be settled within three months of receipt. 

The policy assistance application cannot be implemented until the down payment is cashed. And the loans of institutions that have already received special facilities through the selection committee formed for policy assistance cannot be rescheduled.

Bangladesh Bank first formed a committee in January last year to rescheduling or restructuring defaulted loans with special facilities. 1,200 applications were submitted to that committee. Various questions were raised about providing special facilities through the committee without making specific policies. The committee also included representatives from outside the central bank.