Monday, 17th January, 2022
Monday, 17th January, 2022
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Bangladesh Bank refuses to extend loan moratorium facility

Bangladesh Bank has decided not to extend the loan moratorium extension for enterprises slated to end this Friday, the last day of the calendar year.

The news comes on the heels of the FBCCI’s recent pleas, which entreated the central bank to extend the moratorium facility for at least six more months until June 2022.

The central bank came up with the decision at a meeting with bankers at its headquarters in the capital on Tuesday, said Md Serajul Islam, spokesperson and its executive director.

Governor Fazle Kabir presided over the quarterly meeting with the managing directors in the banking sector.

President of the Federation of Bangladesh Chamber of Commerce and Industries (FBCCI) Md Jashim Uddin on December 26 had sought a loan moratorium extension until June next year, as economic activities were yet to return to normal and traders were still reportedly in dire straits.

To help businesses stay afloat during the pandemic, the government gave loan repayment facilities to enterprises, but after failing to repay the loans, the central bank announced that only 20% of the entire amount had to be paid – this was later changed to 25% – by December 31, 2021.

The FBCCI president further said that extending the debt moratorium period for six more months would bring relief for traders and speed up economic recovery.

As per central bank rules, borrowers will not be considered defaulters if they repay 25% of their total instalments payable in 2021.

However, during Tuesday’s meeting, the central bank slightly relaxed the rules for small and medium enterprises (SMEs), who now can avoid falling into the defaulters’ list if they repay 15% of their total instalments.

The central bank recently said that banks would have to keep an additional 2% provision against the loans that would avoid the default zone on the back of the relaxed policy.

Lenders are permitted to keep 1.5% provision against SME loans.

As per a proposal from the FBCCI, borrowers, who have taken loans of up to Tk10 crore from banks, should be treated as non-defaulters even if they are unable to pay any instalment.

Clients, whose outstanding loans ranged from Tk10 crore to Tk500 crore, should be considered as non-defaulters if they can give only 2% of their payable instalments.

Those with more than Tk500 crore loans should be allowed to avoid the default category if they can pay 1% of the payable instalments, according to the proposal.

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