BRPD Circular No. 12: Providing special financial policy assistance for the agriculture and SME sectors' borrowers affected by the recent Padma river erosion

BRPD Circular No. 12 Date: ---------------------- 02 Kartik, 1425

Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. 17 October, 2018

To, Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh

Dear Sir,

Context: Providing special financial policy assistance for the borrowers of the agriculture and SME sectors affected by the recent Padma river erosion.

Several upazilas, including Naria Upazila of Shariatpur district, have recently fallen victim to the erosion of the Padma River. As a result of the river erosion, several markets, houses, mosques, various structures, business establishments, and bridges-culverts in the said area have disappeared into the river. The borrowers, especially entrepreneurs in the agriculture and SME sectors, in the areas affected by the erosion, have been severely affected and may face difficulties in repaying their loans within the stipulated time. Furthermore, due to the river erosion, commercial activities have been halted, making it difficult for most cases to extend the loan tenure by making down payments at the concessional rate according to existing policies.

In such circumstances, the classification of loans in the said sectors as non-performing and the hindrance to new loan flow in banks may lead to stagnation in normal economic activities.

In view of the above, to bring back the affected borrowers in the upazilas of Shariatpur district affected by the river erosion to normal economic activities and to provide special financial policy assistance for their rehabilitation, the following decisions have been taken:

1. To prevent farmers and entrepreneurs affected by river erosion from becoming loan defaulters, loans in the agriculture and SME sectors may be rescheduled based on bank-customer relationships and specific circumstances, with relaxation of down payment percentages. A maximum grace period of 06 months may be provided. Furthermore, to enable affected borrowers to receive new loan facilities on time based on actual needs, rescheduled new loan facilities may be provided without depositing any amount (except for the principal amount). Other instructions of BRPD Circular No. 15/2012 and 06/2013 regarding loan rescheduling shall remain unchanged;

2. To help farmers in affected areas recover from losses and to continue agricultural activities in cultivable areas (if any), priority shall be given to providing loans for imported alternative crops (pulses, oilseeds, spices, and corn) as special agricultural loans at a 4% concessional interest rate based on the actual needs of farmers, in accordance with paragraph 6.19.1 of the Agriculture and Fisheries Loan Policy;

3. In the current fiscal year 2018-19, in accordance with the decision taken by the Financial Institutions Division of the Ministry of Finance to waive interest on bank loans for impoverished farmers whose assets were completely destroyed by river erosion, the concerned banks shall take necessary measures to waive interest based on the applications of affected farmers;

4. Necessary measures shall be taken to prevent non-performing loans from becoming time-barred without filing new certificate suits based on bank-customer relationships, and demands of filed certificate suits (Certificate Suits) shall be kept suspended for 6 (six) months, and cases may be resolved through Solanama if necessary;

5. Strict monitoring shall be conducted to ensure that farmers affected by river erosion do not face any harassment in receiving new loans on time based on actual needs.

The above instructions shall be implemented immediately, and the aforementioned rescheduling and rescheduled new loan facilities shall remain valid until March 31, 2019.

Yours faithfully,

(Abu Farah Md. Nasir) General Manager Phone: 9530252