BRPD Circular No. 16: Master Circular on Loan Rescheduling and Restructuring

Bangladesh Bank Chief Executive Office Motijheel, Dhaka-1000 Bangladesh. Ref No: BRPD Circular No. 16 Banking Regulation and Policy Department 18 July 2022 BRPD Circular No. 16 Date: ----------------- 03 Srabon 1429

To, Managing Directors/Chief Executive Officers All Scheduled Banks operating in Bangladesh.

Dear Sir, Master Circular on Loan Rescheduling and Restructuring.

1. Attention is drawn to your BRPD Circular No. 15 dated 23 September 2012 and BRPD Circular No. 06 dated 29 May 2013 on the subject above.

2. In order to maintain stability in the financial sector and for the proper management of classified loans, due to the long-term negative impact of COVID-19, global economic instability arising from the prolonged war situation in the outside world, and the renewed increase in COVID-19 infections, a new policy on loan rescheduling is being issued.

3. General Instructions: (1) This policy shall be considered as the minimum standard for loan rescheduling and restructuring. Banks shall formulate their own policies on loan rescheduling and restructuring in conformity with this, which must be approved by their Board of Directors. No flexible percentage lower than those specified in this circular may be included in the formulated policies. In cases where customers are financially distressed or there is uncertainty regarding the full recovery of the advanced loan, necessary measures must be included in the policy to avoid irregular rescheduling or repeated rescheduling. In particular, strict regulations must be in place for the rescheduling of loans to non-productive business establishments or unprofitable business establishments in productive sectors.

(2) Bank officials shall examine the rescheduling application submitted by the borrower with utmost caution to uncover the reasons for the loan becoming classified. If the borrower has transferred funds elsewhere or is a habitual loan defaulter, their rescheduling application shall not be considered; instead, necessary legal measures must be taken for the recovery of the said loan.

(3) If a borrower applies for loan rescheduling by making the necessary down payment in cash, the bank shall take steps to settle the application within 03 (three) months from the date of receipt. If a customer makes the necessary amount as a down payment through cheque, pay order, or any other instrument, the bank shall commence the rescheduling process after the encashment of such instrument.

(4) Any amount paid as a regular installment prior to the submission of the loan rescheduling application by the borrower shall not be considered as a down payment. However, a consolidated down payment deposited with the bank within the immediate 3 (three) months or 90 (ninety) days prior to the rescheduling, with prior intimation to the bank for the purpose of rescheduling, may be considered as a down payment.

(5) Before taking a decision on loan rescheduling, the concerned bank shall verify the customer's overall loan repayment capacity by considering the customer's liabilities at other banks and financial institutions.

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-02- (6) By examining the customer's liquidity statement, audited financial statements, income-expenditure statement, and other financial statements, the bank shall ensure the customer's ability to pay the installments of the rescheduled loan/existing liabilities.

(7) In applicable cases, bank officials shall conduct a field visit to the customer's business premises and verify whether the concerned company/business establishment will have sufficient surplus funds or earnings to repay the rescheduled liabilities. The Inspection Department of Bangladesh Bank shall require banks to properly preserve documents and deeds related to rescheduling at the branch for verification during inspections.

(8) After ensuring that the customer will be able to repay the bank's dues by properly complying with the aforementioned banking regulations, the concerned bank shall reschedule the loan account. Otherwise, the bank shall take all possible legal measures for recovery and make necessary provisions.

(9) The bank's Credit Committee shall certify in writing the appropriateness of the loan rescheduling. The certification shall appropriately record the matters considered by the Credit Committee to ensure that the loan account will be fully recovered, along with logical reasons recorded in favor of the bank's long-term profit retention and easier maintenance of capital adequacy due to rescheduling. Additionally, the certification shall explain the impact of rescheduling on the bank's liquidity position and the loan receivability of other customers.

4. Maximum Number and Tenor of Loan Rescheduling and Minimum Down Payment: (1) Any classified loan shall be eligible for rescheduling up to 03 (three) times. However, for special consideration regarding the recovery of defaulting loans, it may be rescheduled a 4th time.

(2) Tenor: (a) For the 1st and 2nd loan rescheduling, the maximum time limit including the grace period shall be as follows:

Nature of Loan	Amount of Loan Outstanding	Maximum Tenor (Including Grace Period)
Term Loan	Less than 100.00 Crore Taka	6 Years
Term Loan	100.00 Crore Taka and above but less than 500.00 Crore Taka	7 Years
Term Loan	500.00 Crore Taka and above	8 Years
Current and Call Loan	Less than 50.00 Crore Taka	5 Years
Current and Call Loan	50.00 Crore Taka and above but less than 300.00 Crore Taka	6 Years
Current and Call Loan	300.00 Crore Taka and above	7 Years

(b) In each case of the 3rd and 4th rescheduling, the maximum tenor shall be reduced by at least 1 year respectively from the tenor specified in clause 4(2)(a). [Explanation: If the maximum tenor for a customer's loan account is 7 years for the 2nd rescheduling, the maximum tenor for the 3rd rescheduling shall be 6 years, and for the 4th rescheduling, the maximum tenor shall be 5 years.]

(c) For the 1st rescheduling of Agriculture and Micro loans, the tenor shall be a maximum of 3 years, and for the 2nd and subsequent reschedulings, the maximum tenor shall be 2 years 6 months.

(d) Based on the bank-customer relationship, the grace period for the amount of the loan shall be 06 months. However, considering the extent of the customer's loss, the tenor of the said grace period may be determined up to a maximum of 1 year.

(e) The maximum rescheduling tenor shall not apply equally to all borrowers. The rescheduling tenor must be determined by appropriately considering the extent of loss of the actually affected borrower. Clear reasons must be mentioned in the memo presented to the Board/Executive Committee meeting of the bank and in the minutes of the meeting regarding the determination of the tenor.

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-03- (3) Down Payment: (a) For the 1st and 2nd loan rescheduling, the rate of minimum cash down payment shall be as follows:

Nature of Loan	Amount of Loan Outstanding	Total Overdue Installments	Total Outstanding Loan
Term Loan	Less than 100.00 Crore Taka	7.00%	4.50%
Term Loan	100.00 Crore Taka and above but less than 500.00 Crore Taka	6.00%	3.50%
Term Loan	500.00 Crore Taka and above	5.00%	2.50%
Current and Call Loan	Less than 50.00 Crore Taka	-	4.00%
Current and Call Loan	50.00 Crore Taka and above but less than 300.00 Crore Taka	-	3.00%
Current and Call Loan	300.00 Crore Taka and above	-	2.50% (However, not less than 9.00 Crore Taka)

Note: For Current and Call Loan less than 50.00 Crore Taka, the down payment is 4.00% of Total Outstanding Loan. For Current and Call Loan 50.00-300.00 Crore, it is 3.00% of Total Outstanding Loan. For Current and Call Loan 300.00+ Crore, it is 2.50% of Total Outstanding Loan (min 9.00 Cr). For Term Loans, it is the lower of the two calculated amounts.

(b) In the case of term loans, the lower of the total amounts calculated at the specified percentages against the overdue installments and the total outstanding loan shall be recoverable as the minimum down payment.

(c) In each case of the 3rd and 4th rescheduling, the down payment must be collected at a rate 1.00% higher respectively than the rate specified in clause 4(3)(a). [Explanation: If the down payment rate for a customer's loan account is 3.50% for the 2nd rescheduling, the minimum down payment rate for the 3rd rescheduling shall be 4.50%, and for the 4th rescheduling, the minimum down payment rate shall be 5.50%.]

(d) A rule imposing equal minimum down payment collection for all borrowers shall not be applied. The down payment rate must be determined considering the actual financial condition and cash flow of the borrower.

5. Minimum Down Payment Collection for Providing New Loan Facilities after Loan Rescheduling: (1) Following existing rules and regulations, after loan rescheduling under this circular, new loan facilities may be provided to the borrower, and the existing loan limit of the borrower may be increased, subject to collecting a minimum of 3% (2% for exporter borrowers) of the rescheduled loan outstanding amount as down payment in cash. However, the bank must ensure that the customer was actually affected before granting new loans or increasing loan limits. Furthermore, banks must exercise utmost caution in providing new loans to long-term old defaulting borrowers.

(2) A customer may take a new loan from another bank with no objection from the rescheduled bank/financial institution, subject to providing the down payment at the rate specified in clause 5(1).

6. Percentage to be Followed in Regular Term Loan Restructuring: (1) Regular (non-classified: Standard or SMA) term loans (created not by converting current, call, or any other type of loan) may be restructured by extending the maturity up to a maximum of 50% of the existing remaining maturity of the loan. Such restructuring facility may be provided only once to a loan account within the loan tenure.

(2) Term loan restructuring may be done without accepting any down payment.

(3) The decision on loan restructuring must be approved by the Board of Directors/Executive Committee.

(4) A rescheduled loan cannot be restructured.

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-04- 7. Special Instructions: (1) Since call loans, current loans, or term loans are of various natures, such loans cannot be combined and rescheduled as a single loan account. However, multiple loan accounts of the same nature (subject to the same rescheduling sequence) may be combined and rescheduled as a single loan account.

(2) If any classified loan has been rescheduled 4 (four) or more times before the issuance of this circular, it may be rescheduled one last time for special consideration, which will be counted as the 4th time. Such rescheduling facility will be available until 31 December 2023.

(3) If any loan becomes defaulting even after the 4th rescheduling, the bank must necessarily take appropriate legal measures including filing a case in the Money Loan Court, Alternative Dispute Resolution, Arbitration, Bankruptcy Court, or any other similar court for recovery of dues. However, there is no restriction on taking any legal measures specified in this circular without rescheduling any classified loan or at any stage of rescheduling.

(4) Any call loan created through the opening of an import letter of credit without prior approval from the Board for creating long-term loans for the installation of capital machinery shall not be eligible for rescheduling. Such loans must be recovered/adjusted immediately.

(5) The facilities specified in this circular shall not be provided in the case of loans created through forgery/fraud or any other type of deception/irregularity.

(6) For rescheduling/restructuring under this circular, notes submitted to higher authorities along with the memo presented to the bank's Board/Executive Committee meeting and the minutes of the meeting must appropriately present matters such as the necessity of providing the facility, the customer's financial capacity, projection of sufficient liquidity flow for loan repayment after providing the facility, etc., and the bank must ensure Form FBF appropriately.

(7) For the 1st and 2nd loan rescheduling, the Board of Directors/Executive Committee shall be considered the final approving authority. However, for the 3rd and 4th reschedulings, the approval of the Board of Directors must necessarily be obtained.

(8) In the case of 'Bank-related Persons' and 'Bank Directors' regarding loan restructuring, rescheduling, or providing new loan facilities after rescheduling, the bank must obtain prior approval from the Banking Regulation and Policy Department in accordance with Sections 26B and 27 of the Companies Act, 1994, and the instructions specified in BRPD Circular No. 04 dated 23 February 2014 issued by Bangladesh Bank under the said sections.

8. Instructions Regarding Classification, Provisioning, and Suspended Interest of Rescheduled Loans: (1) Considering the customer's existing financial capacity and repayment ability, the rescheduled loan may be included in any classification.

(2) Such classification may be re-evaluated by Bangladesh Bank's inspectors. Regardless of which classification the bank includes the loan account in, the rescheduled loan shall not be considered as a 'Defaulting Loan' and the customer as a 'Defaulting Borrower' for the purpose of Section 27C(3) before the rescheduled loan becomes defaulting again, in accordance with the provisions of Section 5G(g) of the Companies Act, 1994.

(3) In the case of loans classified as Substandard/Doubtful/Loss, or in the case of 3rd and 4th reschedulings, the interest kept as suspended interest and the provisioned amount against the rescheduled loan account shall not be transferred to the bank's income account without actual recovery.

9. Approval of Rescheduling/Restructuring: Rescheduling/restructuring cases shall be settled with the approval of the bank's Executive Committee or Board of Directors, as applicable based on the bank-customer relationship. In this regard, there is no need to obtain prior approval from Bangladesh Bank.

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-05- 10. Reporting: (1) Information on rescheduled loan accounts must be reported to the Credit Information Bureau (CIB) of Bangladesh Bank. For the 1st, 2nd, 3rd, and 4th reschedulings, loan accounts shall be shown in CIB as R-1, R-2, R-3, and R-4 respectively. If loan rescheduling is done with interest waiver, they shall be shown as RW-1, RW-2, RW-3, and RW-4 respectively.

(2) The rescheduling sequence number must be necessarily mentioned as R-1/R-2/R-3/R-4 or RW-1/RW-2/RW-3/RW-4 in the approval letter and in the Approval Date/Last Renewal/Rescheduling column of the CL Form.

(3) The bank must submit a report in the form of a statement (according to Annexure-'A') on a quarterly basis to the Banking Regulation and Policy Department by the 10th of the following month, and must present updated statements along with all relevant documents as required by the Bangladesh Bank inspection team.

11. BRPD Circular No. 15 dated 23 September 2012 and BRPD Circular No. 06 dated 29 May 2013 are hereby repealed. However, actions taken under the repealed circulars until the issuance of this circular shall be considered valid.

12. These instructions are issued under the power granted by Section 49(1)(c) of the Companies Act, 1994. These instructions shall come into force immediately.

Yours faithfully, (Maksuda Begum) Director (BRPD) Phone: 9530252

Annexure-'A' Name of the Bank:

Date-wise Information

(A) Information regarding the bank's total rescheduled and restructured loans (In Crore Taka)

Total Loan	Total Amount of Rescheduled Loans	Amount of Rescheduled Loans in Current Quarter	Total Amount of Restructured Loans	Amount of Restructured Loans in Current Quarter	Remarks
(1)	(2)	(3)	(4)	(5)	(6)

(B) Borrower-wise information regarding rescheduled loans (For Term Loans of 100 Crore and above, and for Current and Call Loans of 50 Crore and above) (In Crore Taka)

Sr.	Name of Borrower (Individual/Establishment)	TIN of Borrower Establishment and VAT in applicable cases	Total Loan Outstanding	Total Amount of Classified Loans	Amount of Rescheduled Loan Outstanding	Nature of Loan at Approval (Current, Call, Term, etc.)	Rescheduling Sequence (1st, 2nd, 3rd, etc.)	Amount of Down Payment Provided	Percentage Rate	Remarks
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)
1
2

1TIN - Tax Identification Number 2VAT - Value Added Tax

(C) Borrower-wise information regarding restructured loans (Loans of 100 Crore and above) (In Crore Taka)

Sr.	Name of Borrower (Individual/Establishment)	TIN of Borrower Establishment (TIN)	Total Loan Outstanding	Remaining Tenor of Existing Loan	Amount of Restructured Loan Outstanding	Tenor of Restructured Loan	Amount of Down Payment Collected (If any)	Percentage Rate	Remarks
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
1
2

Signature (Name and Designation)

Name and Designation of Responsible Officer: Office Phone No: Mobile Phone No: E-mail: