CGD Circular Letter No. 01: Settlement of Guarantee Claim under Credit Guarantee Scheme

Bangladesh Bank Central Office Motijheel, Dhaka-1000 Bangladesh Ref: CGD Circular Letter No. 01 Credit Guarantee Department CGD Circular Letter No. 01 19 February 2023 Date: --------------------- 6 Falgun 1429

To: Managing Director / Chief Executive Officer All Scheduled Banks and Financial Institutions operating in Bangladesh.

Dear Sir,

Subject: Settlement of Guarantee Claim under Credit Guarantee Scheme.

Reference is made to your attention regarding SMESPD Circular No. 03, dated 27 July 2020; SMESPD Circular No. 01, dated 23 January 2022; and CGD Circular No. 02, dated 10 August 2022.

2. Through the aforementioned circulars, guidelines were issued regarding the provision of credit guarantee benefits against loans provided under the financial assistance package of BDT 20,000 (Twenty Thousand) Crore for the MSME sector; the re-financing scheme of BDT 500 (Five Hundred) Crore for primary/landless farmers, low-income professionals, school banking account holders, and small business account holders with 10/50/100 Taka accounts; and the pre-approval scheme of BDT 25,000 (Twenty-Five Thousand) Crore for the MSME sector.

3. Section 4.13 of CGD Circular No. 02/2022 outlines the guidelines to be followed regarding credit guarantee claims and settlement. Among these, Section 4.13(x) provides instructions that for classified bad debts up to BDT 200,000 (Two Hundred Thousand) Taka in the cottage and micro sectors, where litigation is not mandatorily required under the Debt Recovery Tribunal Act, 2003, the financial claim payable against the guarantee may be made without filing a case in court.

4. Through BRPDL Circular Letter No. 01/2023, instructions were issued that for small amount loans in sectors other than agriculture and MSME, litigation costs are often higher than the loan amount; therefore, for loan write-offs up to BDT 500,000 (Five Hundred Thousand) Taka, where litigation is not mandatorily required under the Debt Recovery Tribunal Act, 2003, the claim may be settled without filing a case in court.

5. Since the benefit described in paragraph 4 above is equally applicable to borrowers in all sectors, including MSME, the following instruction is hereby issued: For borrowers who have received guarantee benefits under the Credit Guarantee Scheme in the cottage, micro, small, and medium enterprise (MSME) sectors, and under the BDT 500 (Five Hundred) Crore re-financing scheme established for primary/landless farmers, low-income professionals, school banking account holders, and small business owners with 10/50/100 Taka accounts, if they have classified bad debt liabilities up to BDT 500,000 (Five Hundred Thousand) Taka and litigation is not mandatorily required under the Debt Recovery Tribunal Act, 2003, banks and financial institutions may make the financial claim payable against the credit guarantee without filing a case in court.

6. Except for the aforementioned instructions, other existing instructions regarding credit guarantee claims and settlement contained in SMESPD Circular No. 03/2020 and 01/2022, and CGD Circular No. 02/2022, shall remain unchanged.

7. This instruction shall take immediate effect.

This instruction is issued under the powers conferred by Section 45 of the Bank Company Act, 1991, and Section 18 of the Financial Institution Act, 1993.

Yours faithfully,

(Manoj Kumar Howlader) Director (CGD) Phone: 9530179