Massive rule relaxation for loan defaulters

The Bangladesh Bank today relaxed the policy for loan rescheduling of defaulted loans grossly, as the defaulters will now get a maximum of eight years to repay term loans instead of the previous two years.

Defaulters will also be allowed to reschedule their non-performing loans (NPLs) for four times in contrast to the previous three times, according to a Bangladesh Bank notice.

As per the new rules, defaulters who took term loans will be allowed to repay funds by enjoying 6-8 years compared to the previous tenure of 9-24 months after rescheduling their NPLs.

Term loans, which tenure is more than one year, are usually given out to businesses to set up new industrial units and expand their existing ones.

Defaulters who took working capital and demand loans will be permitted to pay back loans in 5-7 years in contrast to the previous tenure of 6-18 months.

Clients normally take working capital and demand loans with tenure below one year to run their ongoing businesses.

Clients will also enjoy a grace period of between 6 and 12 months before starting to repay the rescheduled loans. Such down payment was absent in the previous central bank policy.

The BB has also declared a big relaxation on the rules of down payments to be given by defaulters.

As per the rules, defaulters who took term loans will have to give only 2.5-6.5 per cent down payment of their total NPLs instead of previous 10-30 per cent.

They will have to give 2.5-5 per cent down payment of their total NPLs, which had been taken from banks in the form of working capital or demand loans. The earlier range of the down payment was 5-15 per cent.

After rescheduling the NPLs, exporters will have to repay 2 per cent of the rescheduled loans in order to get new funds from banks. The previous ratio was 7.5 per cent.

The common borrowers will have to pay 3 per cent of their defaulted loans to enjoy new loans in contrast to the previous ratio of 15 per cent.