BRPD Circular No. 06: Instructions to be Followed in Case of Continuous Loan Renewal

Bangladesh Bank
Chief Executive
Motijheel, Dhaka-1000
Bangladesh.
Ref No: BRPD-Regulatory Policy & Guidelines
Banking Regulation and Policy Department
25 January 2025
BRPD Circular No. 06 Date: -----------------
11 Asharh 1432
Managing Director / Chief Executive Officer
All Scheduled Banks operating in Bangladesh
Dear Sir,
Context of Instructions to be Followed in Case of Continuous Loan Renewal Reference is invited to BRPD Circular No. 15 dated 27 November 2024 regarding Loan Classification and Provisioning.

2. Clause 5(d) of the aforementioned circular defines "Current Loan" (Revolving Loan), and Clause 6(d)(1) defines "Overdue Loan" (Overdue). On the other hand, Clause 6(f)(r) of the same circular states that there is no opportunity to declassify a classified loan except for the portion of the overdue amount. According to the instructions mentioned in the aforementioned clauses, a current loan must be renewed in full or renewed within the existing maturity period.

3. It has recently been observed that in the case of current loan renewal, renewal is being approved by defining a new loan limit including the excess amount of the loan, and in many cases, the excess amount for renewal is being transferred to a separate loan account, which is contrary to banking regulations. Now, in order to maintain loan discipline in the banking sector, the following instructions are to be followed in the case of current loan renewal:

a) Current loans must be renewed within the existing maturity period. However, loan renewal cannot be done without adjusting the excess amount of the loan;

b) The excess amount of the current loan cannot be separated from the main loan account to create a new loan or transferred to any other loan account.

4. These instructions are issued under the powers granted by Section 45 of the Bank Company Act, 1991 (amended up to 2023).

5. These instructions will come into effect immediately.

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