No loan classification in financial institutions until December: BB

Considering the impacts of the Covid-19 pandemic, the Bangladesh Bank, like banks, has relaxed loan classification for financial institutions.  

In a circular on Sunday, the central bank instructed such institutions not to classify loans until 31 December.

The financial institutions and markets department of the central bank issued the circular, which said no client could be classified as a defaulter for failing to repay loan instalments until 31 December.       

No penalty interest, additional fee, charge, or commission may be imposed during this period either.

However, from January 2021, loans can be classified again as usual, said the circular.

The Bangladesh Bank issued a circular, on 24 March, instructing that loans of financial institutions from January to June not be classified – as part of measures to revive the economy rocked by the pandemic.

It issued another circular on 26 August, instructing that the classification of loans stop until September 30.

As the facility was extended until 31 December in the latest circular, clients of financial institutions, like those of banks, have benefited from not paying loan instalments throughout the year.

Centre for Policy Dialogue's Senior Research Fellow Towfiqul Islam Khan told The Business Standard it was right to give the facility to financial institutions like banks.   

However, the lack of good governance, he said, was acute in financial institutions, too, adding that special measures were needed to address this problem. 

Meanwhile, in another circular, the central bank extended the deadline for disbursement of loans from incentives packages for cottage, micro, small, and medium enterprises (CMSMEs) from 31 October to 30 November.

The circular issued by the SME and Special Programmes Department said a special loan was announced for the CMSME sector in the Tk20,000 crore bailout package to tackle the pandemic's blows.     

However, despite the target of distributing Tk7,000 crore from the package by 31 October, Tk 6,000 crore was disbursed. The desired production and services in the CMSME sector were being hampered as some banks and financial institutions were lagging behind the target of loan disbursement.

Therefore, in the interest of keeping the economy moving, the deadline was extended until 30 November, the central bank circular said. 

In this regard, Towfiqul said extending the deadline to disburse loans, alone, would bring no benefit.

Intead, the obstacles to distribution have to be removed, he said.

The whole structure of loan disbursement can be changed, if necessary, to provide incentive loans to small and medium enterprises outside the capital, he added.