Defaulters and borrowers who have rescheduled their loans more than three times will not get fresh financing under the Tk30,000-crore stimulus package the government has announced to support industries and the service sector affected by Covid-19.
The Bangladesh Bank on Sunday issued a guideline with a set of strict conditions including maintaining single borrower exposure limit, loan classification and provisioning rule, and highest loan limit for both banks and clients, making it difficult for the targeted beneficiaries to avail loans under the bailout package.
Non-bank financial institutions can also provide loans under this package.
At the same time, the Bangladesh Bank further eased money circulation for banks by raising the advance-deposit ratio (ADR) by 2 percentage points to help them implement the package.
The new ADR increased to 87 percent for conventional banks from the existing 85 percent, and 92 percent for Islamic banks from 90 percent.
Earlier on April 5, Prime Minister Sheikh Hasina announced a stimulus package of Tk72,750 crore, of which 69 percent or Tk50,000 crore will come from banks.
Of the Tk50,000 crore, Tk30,000 crore has been allocated for affected industries and the service sector while Tk20,000 crore has been allocated for small and medium enterprises.
The loan of Tk30,000 crore will be given at 9 percent interest rate, of which 4.5 percent will be subsidised by the government and the rest will be paid by borrowers.
Requirements to get the loans
Industries which are running business with their own capital will get loan facilities under the newly announced package only if they can obtain at least a marginal credit rating in line with the guidelines on Internal Credit Risk Rating System for Banks (ICRRS), according to the central bank circular.
The working capital can be used only for running regular business activities. Loans taken out under the stimulus package cannot be used for adjusting existing loan accounts or for business expansion.
Single borrower exposure limit will be applicable for taking out loans under the package.
Industries which already have loans with banks will get maximum 30 percent of their existing approved loan limit.
New borrowers will get the highest 30 percent of the loan limit that is fixed for the respective bank under the package.
A single client will get this subsidised loan under the package only for one year. Banks can provide such loans for three years.
Such loans will be termed as working capital under the stimulus package and banks will report these in their loan classification statements.
The loan facilities cannot be extended but banks can extend them based on a borrower's good track record. In this case, borrowers will get interest subsidy only for a year.
How banks will select client
Every bank will set a loan limit under this package which will come under the government subsidy. If banks lend more than that limit, they will not get a subsidy for the excess amount.
Banks will provide loans after ensuring that the client has been affected by the coronavirus pandemic.
Banks will lend after assessing the gravity of losses incurred by applicants and the bank-client relationship.
If the amount of loan demanded under the package exceeds the loan limit of a bank, it will lend on priority basis to the most affected industries.
Banks will be entirely responsible for recovering loans and maintaining a required provision if any loan goes into default, according to the guideline.