BRPD Circular Letter No. 29: Repayment Procedure of Term Loan

Bangladesh Bank Chief Executive Office Motijheel, Dhaka-1000 Bangladesh. Ref No.: BRPD Banking Regulation and Policy Department June 25, 2024 BRPD Circular Letter No. 29 Date: ----------------- 11 Asharh 1431 Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh Dear Sir, Regarding the repayment of installments for Term Loan/Investment We draw your attention to BRPD Circular No. 10 dated May 8, 2024, regarding the determination of interest rates on loans.

2. Through the aforementioned circular, you are instructed to determine loan interest rates based on the relationship between bank and customer, subject to loan demand and loanable fund supply in the banking sector, with the aim of making loan interest rates fully market-driven by following internationally accepted best practices.

3. The Bangladesh Bank has been informed that customers are facing difficulties in paying installments due to the increase in the amount of installments payable by industrial establishments and individual housing construction loan borrowers, which is higher than the interest rates determined before July 1, 2023, in both the floating and market-based interest rate scenarios, in the context of the current unfavorable economic situation. In this regard, it is necessary to consider the matter of extending the tenure without increasing the installment amount for existing term industrial loans and housing construction loans, in order to maintain the momentum of industrialization and export, and to maintain the repayment capacity of borrowers with limited income.

4. Now, in the matter of repayment of installments for term industrial loans (Term Industrial Loan) and housing loans (Housing Loan) provided under the category of consumer loans distributed before July 1, 2023, the following instructions are to be followed:

a) The interest rates determined in accordance with BRPD Circular No. 10/2024 shall be applicable. However, the loan installments shall be repaid keeping the installment amount determined by the bank immediately before July 1, 2023, unchanged;

b) The tenure required for repayment of installments in accordance with the above clause (a) may be increased. In such repayment cases, increasing the tenure shall not be considered as loan restructuring under BRPD Circular No. 16/2022;

c) In the case of loans taken by salaried employees against their salary, the bank may decide on its own discretion regarding the repayment of the loan principal within the time limit of the customer's retirement from employment;

d) Loan accounts classified as non-performing as of March 31, 2024, shall be covered under the aforementioned facility;

e) This facility shall not be applicable to any converted term loans;

f) This instruction shall not be applicable to loans provided under any incentive package/special fund formulated/established by Bangladesh Bank or the Government; and

g) Banks shall take necessary measures to inform all loan borrowers eligible to avail of the aforementioned facility. Borrowers wishing to avail of this facility must make a written application to the bank. This facility shall be provided upon receipt of the borrower's application.

5. Islamic Shariah-based banks shall follow the aforementioned instructions in the matter of their provided investments and take necessary measures.

6. In light of the issuance of this circular, the instructions of BRPD Circular Letter No. 17 dated April 8, 2024, regarding this matter, are hereby repealed.

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

8. These instructions shall take immediate effect.

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