BRPD Circular No. 14: Loan Classification

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh. Ref No.: BRPD-Regulation & Policy BRPD Circular No.-14 22 June 2022 Date: ---------------- 08 Asharh 1429

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

Dear Sir,

Regarding Loan Classification.

Reference is invited to BRPD Circular No.-19 dated 26 August 2021, BRPD Circular Letter No.-51 dated 29 December 2021, and BRPD Circular Letter No.-53 dated 30 December 2021 on the subject matter mentioned above.

2. It is directed that loans/investments under which a minimum of 15 (fifteen) percent of the installments/principal due from January/21 to December/21 have been collected, shall be shown as unclassified accounts under the benefits provided through the aforementioned circulars and circular letters.

3. It has come to the notice of Bangladesh Bank that borrowers are facing difficulties in paying the full amount of installments due against their borrowed loans due to the long-term negative impact of COVID-19, the recent increase in infections, widespread damage caused by floods in the northern and north-eastern regions of the country, and the rise in prices and transportation costs of raw materials and various inputs in international markets due to the recent war situation abroad. Now, in the current context, to maintain the flow of current financial transactions and to keep the flow of credit in the private sector normal, the following instructions are to be followed regarding loan repayment:

3.1) For term nature loans distributed to 'Large Industries' as defined in Chapter-3 of the National Industrial Policy 2016, which were in unclassified status as of 01 April 2022, if a minimum of 50 (fifty) percent of the installments due from April/2022 to June/2022, a minimum of 60 (sixty) percent of the installments due from July/2022 to September/2022, and a minimum of 75 (seventy-five) percent of the installments due from October/2022 to December/2022 are paid respectively between the last working days of the quarters ending June/2022, September/2022, and December/2022, such loans shall not be classified as classified.

3.2) For term loans distributed in the CMSME and Agriculture sectors, which were in unclassified status as of 01 April 2022, if a minimum of 25 (twenty-five) percent of the installments due from April/2022 to June/2022, a minimum of 30 (thirty) percent of the installments due from July/2022 to September/2022, and a minimum of 40 (forty) percent of the installments due from October/2022 to December/2022 are paid respectively between the last working days of the quarters ending June/2022, September/2022, and December/2022, such loans shall not be classified as classified.

3.3) If existing demand nature loans in unclassified status as of 01 April 2022 are repaid in 3 equal quarterly installments between June/2022 and December/2022, such loans shall not be classified as classified until 31 December 2022.

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3.4) In the case of flood-affected districts of the northern and north-eastern regions of the country (Sylhet, Moulvibazar, Habiganj, Netrokona, Kishoreganj, Sherpur, Jamalpur, Rangpur, Lalmonirhat, Kurigram, and flood-affected districts identified by the Ministry of Disaster Management and Relief),:

a) Loans distributed in the agriculture sector shall not be classified as classified even if the installments due from April/2022 to December/2022 are not paid.

b) For term loans distributed in the CMSME sector, which were in unclassified status as of 01 April 2022, if a minimum of 25 (twenty-five) percent of the installments due from April/2022 to December/2022 are paid by the last working day of December/2022, such loans shall not be classified as classified.

c) For current nature loans distributed in the CMSME sector, where the maturity of such loans has already passed and has not been renewed by the bank under prevailing policies, and which were in unclassified status as of 01 April 2022, the outstanding portion (if any) of such loans must be paid by 100% by the last working day of December/2022.

4. According to the instructions mentioned in Section-03, the remaining amount of installments due until December/2022 shall be paid in equal installments (monthly/quarterly) within 01 (one) year after the original maturity date of the existing loan ends. However, considering the remaining maturity period along with the fixed 01 (one) year period based on the bank-customer relationship, loan installments may be collected according to a new schedule after restructuring the installments.

5. If there is a default in loan repayment according to the instructions mentioned in Section-03, the loans shall be subject to regular classification.

6. Through this circular, no penalty interest or additional fee (however named) shall be charged on loans benefiting from loan installment repayment relief from 01 April 2022 to 31 December 2022.

7. This circular shall also apply to loans shown as unclassified accounts through other rescheduling mechanisms, including loans rescheduled under BRPD Circular No.-05/2019.

8. Islamic Shariah-based banks shall take necessary measures to provide the same benefit by following the above policy in their investment distribution.

9. Necessary instructions regarding the transfer of interest/profit charged on loans/investments benefiting under this circular to the income account and the maintenance of provision against such loans will be issued subsequently.

10. These instructions are issued under the powers conferred by Section 49(1)(c) of the Bank Company Act, 1991.

These instructions shall come into force immediately.

Yours faithfully,

(Maksuda Begum) Director (BRPD) Phone: 9530252