DFIM Circular No. 09: Master Circular: Loan/Lease/Investment Rescheduling for Financial Institutions

DFIM Circular No. 09
Date: 14 September, 2021
30 Bhadra, 1428

To,
All Chief Executive/Managing Directors
Of All Authorized Institutions Operating in Bangladesh.

Dear Sir,

Master Circular on Loan/Lease/Investment Rescheduling.

It has recently been observed that financial institutions, without considering the customer's ability to repay loans, are repeatedly redefining the repayment schedule and installment amounts for various loans/leases/investments, including term, housing, short-term agricultural, and micro loans. Due to the failure to properly reschedule loan/lease/investment accounts and follow the appropriate rescheduling process, the true picture of loan/lease/investment recovery is not being reflected. In such circumstances, this policy has been issued to ensure transparency and effectiveness in the restructuring and rescheduling of loan/lease/investment accounts.

1. Guidelines for Considering Applications for Loan/Lease/Investment Rescheduling:

Rescheduling of loan/lease/investment classified only as substandard (low), doubtful, or bad/loss is permitted.
In considering applications for rescheduling, financial institutions must follow the following guidelines:

1.1 To align with this circular, the Board of Directors of financial institutions must approve a policy regarding the rescheduling of loan/lease/investment accounts. The criteria in such policy must be stated and must not be easier than the criteria specified in this circular under any circumstances.

1.2 The Credit Committee of financial institutions must explain the justification for rescheduling loan/lease/investment accounts through written reports. The impact of rescheduling on the liquidity of the financial institution and other customer demands must also be detailed in their reports.

1.3 In approving the decision for loan/lease/investment rescheduling, the Board must ensure the proper use of the loan.

1.4 To determine the ability of the loan/lease/investment borrower to pay the rescheduled installments/existing debts, financial institutions must examine the customer's cash flow statement, audited balance sheet, income statement, and other financial details. For this purpose, if necessary, financial institutions must conduct on-site inspections of the concerned loan/lease/investment borrower company/business establishment and preserve the inspection reports in the relevant files.

Finance and Market Department
Bangladesh Bank
Head Office
Dhaka.

Ref No: DFIM-09
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1.5 Financial institutions must make a decision regarding the rescheduling of loan/lease/investment accounts within 01 (one) month of the required down payment being deposited in the financial institution's bank account by the customer. Amounts received as installments or parts of loan/lease/investment cannot be shown as down payment.

2. Interest and Provision Calculation for Rescheduled Loan/Lease/Investment:

2.1 Interest on rescheduled loan/lease/investment accounts cannot be transferred to the income account except upon actual recovery. The same rule applies to suspended interest prior to rescheduling.

2.2 If the necessary provision is not maintained against the rescheduled loan/lease/investment account, arrangements must be made to maintain it based on the previous classification (bad/loss) before rescheduling.

2.3 Along with the rescheduling of any loan/lease/investment account, the provision/proportion of provision maintained previously for said loan cannot be transferred to the income account or adjusted with provisions maintained against other loans. After rescheduling, the previously maintained provision/institution's amount can be adjusted proportionally under the heading 'Institutions where recovery is no longer required' in Section 12(c)(1) of DFIM Circular No. 11, dated 23 December 2009, subject to installment recovery according to the new repayment schedule.

3. Time Limit for Rescheduling Term Loan/Lease/Investment According to Classification:

In the case of rescheduling term loan/lease/investment, the repayment period of the loan/lease/investment can be increased according to the following table from the maturity date or the date of the last installment payment:

Rescheduling Installment	Classified as Substandard	Classified as Doubtful	Classified as Bad/Loss
First Installment	Maximum 48 (Forty-Eight) Months	Maximum 36 (Thirty-Six) Months	Maximum 36 (Thirty-Six) Months
Second Installment	Maximum 36 (Thirty-Six) Months	Maximum 24 (Twenty-Four) Months	Maximum 24 (Twenty-Four) Months
Third Installment	Maximum 24 (Twenty-Four) Months	Maximum 18 (Eighteen) Months	Maximum 18 (Eighteen) Months

Criteria:
a) Rescheduled loan/lease/investment must be repaid through monthly or quarterly installments. b) If the unpaid installment of the rescheduled loan equals 6 monthly installments or 2 quarterly installments, the loan/lease/investment account must be reported to the Credit Information Bureau (CIB) after classifying it as bad/loss. c) If a customer's loan/lease/investment account is rescheduled in violation of Bangladesh Bank's policy, the concerned customer's loan/lease/investment cannot be rescheduled in subsequent installments under this circular.

4. Short-Term Loan/Lease/Investment:

In the case of rescheduling loan/lease/investment accounts with a term of one year or less, the repayment period of the loan/lease/investment can be increased according to the following table from the maturity date or the date of the last installment payment:

Rescheduling Installment	Time Limit for Repayment of Rescheduled Loan/Lease/Investment
First Installment	Maximum 12 (Twelve) Months
Second Installment	Maximum 6 (Six) Months
Third Installment	Maximum 6 (Six) Months

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5. Required Down Payment for Loan/Lease/Investment Rescheduling:

In the case of rescheduling loan/lease/investment accounts, financial institutions must collect the required down payment at the following rates:

5.1 First Installment: At least 15% of the term installment or 10% of the total outstanding, whichever is less.
5.2 Second Installment: At least 30% of the term installment or 20% of the total outstanding, whichever is less.
5.3 Third Installment: At least 50% of the term installment or 30% of the total outstanding, whichever is less.

6. Other Guidelines Regarding Rescheduling:

6.1 If the loan/lease/investment borrower fails to repay the obtained loan even after the loan/lease/investment account is rescheduled in the third installment, he/she will be considered a willful defaulter. In this consideration, no loan/lease/investment account can be rescheduled more than three times.

6.2 All information (Forms JI-1, JI-2, JI-3, etc.) regarding rescheduled loan/lease/investment accounts must be sent to the Credit Information Bureau (CIB) of Bangladesh Bank.

6.3 If a loan/lease/investment account with interest waiver is rescheduled, all information (Forms JIWD-1, JIWD-2, JIWD-3, etc.) of those accounts must be sent to the Credit Information Bureau (CIB) of Bangladesh Bank.

6.4 The instructions of DFIM Circular No. 09, dated 29 November 2012, regarding the submission of information about rescheduled loan/lease/investment accounts to Bangladesh Bank via the web portal using the Web Portal (WP) remain unchanged.

The instructions of FID Circular No. 02 dated 05 March 2007 of Bangladesh Bank regarding loan/lease/investment rescheduling are replaced through this circular.

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

Yours faithfully,

(Ranjit Kumar Roy)
Deputy General Manager
Phone: 9530249
03