BB Extends Classification Of Loan Status Until September 30 Amid Fears Pandemic Will Spread


The central bank has extended the deadline for banks to classify lending status to September 30, as it now expects the economy to be plunged into the coronavirus-induced gloom longer than it had imagined earlier .

From now on, banks will have to keep the same credit status of a borrower as on January 30 until the new maturity.

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Banks, however, would be able to classify any loan if their situation improves, the Bangladesh Bank said yesterday in an advisory to help businesses and industries operate in the adverse scenario caused by the pandemic. coronavirus.

Almost all sectors of the economy have been hit hard by the pandemic. As a result, many sectors, services and businesses are unable to conduct normal operations, the central bank said.

On March 19, less than two weeks after the government first reported the country’s first cases of coronavirus, the central bank asked lenders not to view businessmen as defaulters if they don’t. do not repay installments before June 30 of this year.

This came after banks in April asked the finance ministry and central bank to extend the deadline for classifying loan status to December 31 from June 30, as many borrowers do not pay installments in advance. due to losses induced by coronaviruses.

All term loan payments, including agriculture and small loans and investments, between January 1 and September 30 would be considered deferred. The size and number of installments would be reset in October, the BB said.

And borrowers cannot be called defaulters for unpaid installments, according to the BB notice. In addition, banks cannot impose any penalties or fees for unpaid installments for the period January-September.

The financial health of banks is crucial for the recovery of the economy from the impact of the coronavirus pandemic, as there is no alternative source to support and inject money into the economy.

The government unveiled various stimulus packages amounting to 103,117 crore, or 3.7% of the country’s gross domestic product, to help individuals, businesses, entrepreneurs, farmers, industrialists and exporters counteract the impact of the pandemic.

Of the packages, only Tk 3,000 crore would come from the government vault, while the rest would come from the central bank or the lenders themselves, Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said on Sunday.

The central bank eased its monetary policy and took several measures to improve the liquidity position of banks.

The repo rate was lowered from 6 percent to 5.75 percent in March and later to 5.25 percent on April 12.

The cash reserve rate was initially reduced from 5% to 4.5% (daily basis) and from 5.5% to 5% (bi-weekly basis), with a further reduction to 3.5% and 4%, respectively . , from April 15.

The BB raised the loan-to-deposit ratio and the investment-to-deposit ratio by 2 percentage points to facilitate lending to the private sector and improve the liquidity of the banking system.

As part of the stimulus packages, the central bank injected Tk 73,000 crore into the banking system through refinancing programs and CRR reduction, BB governor Fazle Kabir said on Friday.

Thus, the banking sector will not encounter any problem in the implementation of the stimulus plans, he said during the virtual post-budget press conference.

There was Tk 113,000 crore of additional liquidity in the banking sector as of April 30, after reaching the statutory liquidity ratio. There is another additional fund of Tk 62,000 crore due to the healthy reserve, the governor said.

“The liquidity situation is very good.”

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