Regulatory Alerts2021-03-24
Added
BRPD Circular No. 05: Loan Classification
Bangladesh Bank extends the moratorium on loan classification for existing non-performing loans, allowing overdue interest from January 1 to December 31, 2020, to be paid in six equal quarterly installments between March 2021 and June 2022. Demand loans may also be repaid in eight equal quarterly installments within the same period without adverse classification, provided payments are made regularly. The circular specifies that failure to meet any installment results in the immediate cancellation of this benefit, though specific provisions allow for flexibility on certain term loans if paid by June 30, 2021.
Circular No.: BRPD-05
Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. March 24, 2021
BRPD Circular No.-05 Date: ------------------ 10 Chaitra 1427
To, Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh.
Dear Sir,
Regarding Loan Classification.
Reference is drawn to your attention regarding BRPD Circular No.-17; dated: September 28, 2020, and BRPD Circular No.-03; dated: January 31, 2021.
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Considering the negative impact of COVID-19 on the economy of Bangladesh, instructions were issued through BRPD Circular No.-17/2020 regarding loan classification that loans which had a certain classification status as of January 01, 2020, would not be classified more adversely until December 31, 2020. However, if the classification status of any loan improves, it may be classified according to due procedure. Furthermore, through BRPD Circular No.-03/2021, instructions were given to extend the tenure of term loans to facilitate installment repayment.
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It has started to feel the negative impact of the second wave of COVID-19 on the economy of Bangladesh. Moreover, due to the increasing negative impact of COVID-19 globally, export trade is suffering somewhat. Now, to cope with the new negative impact of COVID-19 and simultaneously to gradually normalize the flow of credit in the banking sector, the following instructions will be followed for the repayment of ongoing and callable type loans/investments shown as unclassified as of January 01, 2021, including loans/investments availed under BRPD Circular No.-17/2020:
a) For those ongoing loans/investments whose tenure has already expired and have not been renewed by the bank under prevailing policy guidelines, the interest charged (if unpaid) from January 01, 2020, to December 31, 2020, can be paid in 6 equal quarterly installments between March/2021 and June/2022. Along with the payment of 2020's unpaid interest in the aforementioned manner, if the interest charged up to June/2022 is paid regularly on a quarterly basis, such loans/investments will not be considered as overdue until June 30, 2022.
b) Callable type loans/investments can be paid in 8 equal quarterly installments between March/2021 and December/2022. If installments are paid on a quarterly basis, the loans/investments will not be classified adversely.
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If the installment payable in any quarter mentioned in item no. 03 is not paid, that quarter will be considered as cancellation of this facility, and loans/investments must be classified according to due procedure. However, if the installments payable up to March/2021 against ongoing and callable loans/investments mentioned above, along with term loans/investments under BRPD Circular No.-03/2021, are paid by June 30, 2021, based on banker-customer relations, the loans/investments during that period will not be classified adversely.
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Furthermore, the instructions of this circular will not apply to loans/investments granted under various stimulus packages. In respect of such loans/investments, the policy guidelines of the respective stimulus package must be followed.
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These instructions are issued under the power conferred by Section 45 of the Bank Company Act, 1991.
These instructions will come into force immediately.
Yours faithfully,
(Md. Nazrul Islam) General Manager Phone: 9530252