BRPD Circular Letter No. 14: Simplifying the process of charging and collecting supervision charge

Bank of Bangladesh Chief Executive Motijheel, Dhaka-1000 Bangladesh Ref No.: BRPD-Reg/Policy/01 Banking Regulation and Policy Department 18 March 2024 BRPD Circular Letter No. 14 Date: ---------------- 04 Chaitra 1430 Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh Dear Sir, Regarding simplifying the process of charging and collecting supervision charge Regarding determination of interest rate on loans We draw your attention to BRPD Circular No. 09 dated 19 June 2023.

2. In order to encourage banks to lend in the aforementioned sectors, given that the administrative cost for the CM SME sector and consumer loans is relatively higher compared to industrial and other loans, instructions were provided in sub-section 1(g) of the aforementioned circular that a maximum 1% supervision charge may be collected in the case of CM SME (CM SME) loans and consumer loans (Consumer Loans) including personal loans (Personal Loan) and vehicle purchase loans (Vehicle Loan) under their purview. It was also instructed that the said supervision charge shall be collected/levied once a year and no charge or interest shall be levied on the supervision charge levied on a quarterly basis at a compound rate. Recently, the Executive has been informed that due to various banks adopting different methods for calculating the supervision charge, higher amounts of supervision charge are being collected from customers in some cases.

3. Now, in order to follow a uniform method for collecting the supervision charge and to facilitate customers to pay the supervision charge in the correct amount and through an easy method, the following instructions are to be followed: (a) In the case of levying supervision charge on term loans, the supervision charge shall be calculated considering the average periodic balance of the principal loan (based on monthly/quarterly/half-yearly repayment schedule) as the basis; (b) In the case of current loans, the supervision charge shall be calculated considering the average daily balance of the principal loan (Average Daily Outstanding Balance) as the basis; (c) No type of penalty or interest shall be levied on the supervision charge.

4. In order to simplify the method of paying the supervision charge for loan borrowers, the charge shall be collectible on a monthly/quarterly/half-yearly basis in the case of term loans, maintaining consistency with the relevant loan repayment schedule based on the bank-customer relationship. In the case of current loans, the due supervision charge may be collected at the time of collecting interest on a quarterly basis. Furthermore, in the case of demand loans, it may be collected in a lump sum at the time of periodic repayment or may be collectible in multiple installments during the period with the mutual consent of both parties.

5. If the supervision charge is collected on a monthly/quarterly/half-yearly basis, the supervision charge shall be adjusted at the end of the year based on the calculation of the average outstanding balance obtained to comply with the instructions of Section No. 3. In the case of any loan collection/adjustment before the maturity of the loan, the supervision charge shall be collectible for the said period at a proportional rate.

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-02- (Continued from previous page) 6. No supervision charge shall be levied for the previous period of BRPD Circular No. 09/2023. If any additional supervision charge has been collected from any loan borrower, it shall be refunded/adjusted.

7. Banks operating on the basis of Islamic Shariah may take necessary measures while following the aforementioned instructions in their provided investments.

8. Furthermore, other instructions mentioned in BRPD Circular No. 09/2023 shall remain unchanged.

9. These instructions shall come into force immediately.

10. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

Yours faithfully, (Mohammad Shahriar Siddique) Director (BRPD) Phone: 9530252