The Bangladesh Association of Banks (BAB) has welcomed the Bangladesh Bank move allowing the board of directors of banks to decide on how they would treat defaulted loans.
Previously, the central bank's approval was required to regularise loans under special facilities.
That power is now entirely in the hands of the lenders, as per a central bank circular issued on Monday.
"This is a landmark decision. Very useful and practical. This will be beneficial to all. We welcome the new provision," said BAB Chairman Nazrul Islam Mazumder after paying a courtesy call on the recently appointed Bangladesh Bank Governor Abdur Rouf Talukder on Wednesday.
"Today's meeting was to just exchange greetings nothing else," he added.
Mazumder said, with banks taking full control of loan rescheduling and restructuring, "This will surely reduce our workload and improve loan recovery."
"As a result of the Bangladesh Bank move, accountability of banks will increase. Those who defy the new rules will have to be punished," he added.
Md Serajul Islam, an executive director and spokesperson of the central bank, said the BAB's meeting with the governor on Wednesday was only a courtesy but they raised a few issues.
He described the loan rescheduling facility and a new refinancing scheme for the cottage, micro, small and medium enterprise (CMSME) sector as timely decisions of the governor.
In addition, the BAB discussed with the governor that the interest on loans for luxury items except for the industrial and manufacturing sectors has been increased.
In view of their demands, the governor said that their main goal is inflation control, so this matter will be considered comprehensively.