DFIM Circular No. 04: Special Policy on Loan Repayment through One Time Exit

Department of Financial Institutions and Markets Bangladesh Bank Head Office Dhaka.
Ref No.: DFIM Circular No. 04
To
Chief Executive/Managing Directors
All Financial Institutions operating in Bangladesh.

Dear Sir,

Special Policy on Loan Repayment through One Time Exit.

Due to the ongoing negative impact of COVID-19 on the country's economy and various reasons beyond regulatory control, borrowers have been adversely affected, and many loans of financial institutions are not being recovered on time. Consequently, they are being classified as substandard or doubtful, and the normal flow of loans is being disrupted. In the current context, to bring momentum to the loan recovery operations of financial institutions, improve liquidity, and protect the interests of depositors, the following instructions are to be followed for loans classified as "substandard/doubtful" as of December 31, 2021 (for Islamic Financial Institutions, investments):

1. In the current context, an exit facility may be provided to borrowers who wish to restructure their loans with financial institutions or are unable to keep their business operations active, subject to the following conditions:

   a) A minimum 2% (two percent) down payment based on the loan position as of December 31, 2021, must be deposited to apply for the exit facility;

   b) Based on the financial institution-customer relationship, a maximum period of 1 (one) year may be provided for the approval of exit facility for loan restructuring, and the amount may be paid as a lump sum or in monthly/quarterly installments within the said period;

   c) Interest/profit at the Cost of Fund rate may be charged on the outstanding amount after loan restructuring from the date of approval of the exit facility. However, the said interest/profit shall not be transferred to the income account;

   d) The loan account shall remain classified as "substandard/doubtful" until the entire amount of the loan is paid.

2. While providing the facility mentioned in paragraph 01, based on the financial institution-customer relationship and with the approval of the management of the concerned financial institution, up to 50% of the interest charged on the loan, unpaid interest, penalty interest, or any other charges may be waived. However, the principal amount of the loan shall never be waived. In this regard, the waived interest must be transferred to a separate interest-free suspense account, and the amount kept in the suspense account shall be considered waived after the recovery of the entire amount of the loan in accordance with this policy.

3. For the waiver of interest for state-owned financial institutions, the instructions issued by the Banking Division of the Ministry of Finance, Memo No. Am/Abi/Banking/Branch-1/Various-10/2001-207, dated: 29/06/2006 AD, and Memo No. Am/Abi/Banking/Admin-1/Various-10/2001(Part-1)/67, dated: 12/02/2008, shall be applicable.

Date: 02 Falgun 1428
Date: 15 February 2022

4. Customers wishing to avail of the exit facility may apply to the concerned financial institution within April 30, 2022, subject to payment of the down payment. Any amount deposited previously as any installment or part thereof shall not be considered as down payment.

5. If a customer applies for the facility under this circular subject to the prescribed down payment, the concerned financial institution must make a decision regarding the customer's application within a maximum of 60 (sixty) days from the date of receipt of the application.

6. During the availing of the facility under this circular, ongoing cases on a solvency basis may be stayed. If any subsequent borrower violates any condition of the facility provided, all facilities provided in their favor shall be considered cancelled, and legal measures for loan recovery, including reviving the stayed case of the customer, must be taken.

7. Under this policy, it must be ensured that necessary information (name and contact address of the borrower, loan position, amount transferred to suspense account through waiver, etc.) of various facilities provided to customers based on individual loans/investment accounts executed with the customer is presented to the management, and copies of the minutes are preserved at the concerned branch and Head Office.

8. Information regarding the use of recovered amounts under this policy must be sent to Bangladesh Bank on a quarterly basis (within 15 days of the end of each quarter) through a separate report.

9. This policy shall not apply to loans/investments created through forgery or any other type of fraud/irregularity.

These instructions are issued under the powers conferred by Section 18(c) of the Financial Institutions Act, 1993, and shall come into force immediately.

Yours faithfully,

(Md. Zulkar Nayeen)
General Manager
Phone: 9530178
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