BRPD Circular No. 04: Incentives to Good Borrowers

Ref: No. BRPD-04
Department of Banking Regulation and Policy
Bangladesh Bank
Head Office
Dhaka.
16 May 2019

BRPD Circular No. 04 Date: ------------------
02 Joishtha 1426

Managing Directors / Chief Executives
All Scheduled Banks Operating in Bangladesh

Dear Sir,

Regarding incentives to good borrowers.

Reference is invited to BRPD Circular No. 06 dated March 19, 2015, BRPD Circular Letter No. 16 dated December 30, 2015, and BRPD Circular Letter No. 03 dated February 16, 2016.

2. Although instructions were issued through BRPD Circular No. 06/2015 to incentivize identified good borrowers by providing rebates at specified rates, it has been observed that good borrowers are not receiving the said benefits properly. With the aim of ensuring the identification of good borrowers and providing them with incentives, the following decisions have been taken:

2.1. Good borrowers must be identified every year by the end of September following the criteria below:

2.1.1. If a current borrower's loan account remains in a non-performing-standard status continuously for the current year's September month and the previous four quarters, and transactions in the said loan account are satisfactory according to the sanction letter/renewal letter, the respective customer will be considered a good borrower.

2.1.2. If all demand loans taken by a demand borrower in the current year's September month and the previous four quarters are combined into a non-performing-standard status, the respective customer will be considered a good borrower.

2.1.3. If all installments of a term borrower's loan account are paid regularly within the fixed dates of the last 12 months, and the account remains in a non-performing-standard status in the current year's September month and the previous four quarters, the respective customer will be considered a good borrower.

2.1.4. If a borrower has multiple loans, they will be considered a good borrower if they fulfill the aforementioned percentages separately for each loan.

2.1.5. In all cases, if a customer or their interest-bearing entity has any non-performing loan classified as such in any bank or financial institution in the last 12 months, the said customer will not be considered a good borrower.

3. The following policies must be followed in providing incentives to good borrowers:

3.1. In the case of current/demand/term loans, a minimum 10% rebate (cash) benefit must be provided on the interest/profit paid against the respective loan of the good borrower in the last 12 months ending in September of each year (i.e., from October 01 of the previous year to September 30 of the current year). If the customer is identified as a good borrower in subsequent years, the same benefit will continue. Additionally, necessary loan facilities may be provided based on the good borrower's requirements.

3.2. Based on the said circular, banks must formulate policies for providing incentives to approved good borrowers and display these policies in an easily visible place at each branch for promotion of the said benefits.

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3.3. After being identified as a good borrower, banks must calculate and provide rebates/incentives to borrowers according to entitlement on a case-to-case basis by the middle of December of the respective year. In this regard, the amount provided as rebate/incentive may be paid by debiting the interest/profit received from the respective customer or by maintaining necessary provisions. However, if it is not possible to provide the rebate to a borrower by the middle of December for any special reason, the bank must mandatorily maintain an equivalent amount as necessary provision in the respective account's 'Suspense Account' and ensure the provision of the borrower's entitled rebate within the next three months.

3.4. Borrowers are not required to apply for the rebate/incentive benefit. Banks must take necessary measures to identify good borrowers on their own initiative and provide them with rebates/incentives according to entitlement. However, before providing the rebate/incentive to the borrower, the bank must obtain confirmation from the borrower that they did not have any non-performing loan in their own name or in the name of their interest-bearing entity in any other bank or financial institution in the last 12 months and do not have any currently.

3.5. To encourage good borrowers to repay loans on time, banks must take necessary measures to ensure timely provision of their entitled rebates/incentives by resolving rebate/incentive matters at the branch or regional office level. However, to ensure proper implementation of the circular, banks must verify rebate calculations and provisions through internal audit and ensure necessary internal controls.

3.6. Loan information of good borrowers must be reported to CIB as 'Standard' in subsequent years.

4. The benefits of the said circular will not apply to restructured/rescheduled borrowers.

5. Good borrowers must be provided with the following motivational incentives:

5.1. Good borrowers who use debit or credit cards must be provided with special benefits (reward points, discount facilities, etc.).

5.2. Banks must provide special certificates to good borrowers every year.

5.3. A brief picture of the business success of the top 10 (ten) good borrowers of the bank, along with their photos, must be published in the bank's annual report. Additionally, banks must publish special booklets/magazines featuring photos, profiles, etc., of customers identified as good borrowers for a long period.

5.4. Furthermore, banks may take measures to honor good borrowers by providing recognition/awards through annual ceremonies.

6. Information regarding rebates/incentives provided to good borrowers must be sent to this department by April 30 of the following year, after the end of each accounting year, according to 'Annex-A'.

7. These instructions will be effective from the 2019 accounting year. As a result of the issuance of this policy, all previous instructions related to this matter are repealed.

Yours faithfully,

(A.K.M. Amzad Hossain)
General Manager
Phone: 9530252

Annex-A
Information Regarding Incentives to Good Borrowers (Amount in Taka)

Bank Name:
Accounting Year: 20.... (From October 01, 20.... to September 30, 20....)

Information on Rebates Provided	Information on Rebates Provided
For Good Borrowers	Reserved Provision Amount (if any)
Loan Amount (The amount of loan on which rebate is calculated)	Number of Borrowers
Amount	Number of Borrowers
Amount	Number of Borrowers