DFIM Circular Letter No. 36: Loan/Lease Classification and Provisioning

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh.

Ref. No. DFIM/Circular-36 To: Managing Director / Chief Executive Officer All Finance Companies Operating in Bangladesh.

Dear Sir,

Loan/Lease Classification and Provisioning.

Reference is drawn to your attention to Paragraph No. 3.3 of the Master Circular on Loan/Lease Classification and Provisioning - DFIM Circular No. 04, dated: 26 July 2021.

2. It has been observed recently that some finance companies are showing goods-based quantifiable loans/leases as regular loans/leases under the said paragraph, which is not acceptable. In this regard, it is clarified to clarify the said paragraph that:

a) The instruction contained in the said Paragraph No. 3.3 regarding "Upgradation of the category of loan/lease is possible from time to time based on the internal evaluation of the financial institution, which is acceptable" shall apply only in the case of upgradation of the category of loans/leases classified as non-performing qualitatively at the sole discretion of the finance company; and

b) The upgradation, regularization, or analysis of loans/leases classified quantitatively shall be done through the payment of overdue amounts, and the classification shall be determined based on the number of installments specified in Section 3.1 of the said circular.

3. The above instructions shall be implemented immediately. Furthermore, the other instructions contained in the said circular shall remain unchanged.

4. These instructions are issued under the power conferred by Section 41(2)(d) of the Finance Companies Act, 2023 (Act No. 59 of 2023).

Yours faithfully,

(Gautam Kumar Ghosh) Director (DFIM) Phone: 9530178.

Date: 18 Agrahayan 1431 03 December 2024

Finance Institutions and Market Department