In a significant move to bolster the liquidity of the private sector, Bangladesh Bank has announced a major relaxation of the regulations governing the renewal of continuous loans. This policy shift effectively dismantles a restrictive directive issued eight months ago, which had previously prohibited the renewal of loans exceeding their sanctioned limits without full repayment of the surplus.
Under the new guidelines, borrowers are now permitted to renew their credit facilities even if they exceed their limits, provided the loans have not yet deteriorated into the “Bad/Loss” category of default. This period of regulatory leniency is slated to remain in effect until 2027, offering a substantial breathing space for businesses struggling with cash flow volatility.
A Shift in Central Bank Strategy
This policy pivot follows the recent appointment of Md. Mostakur Rahman, a prominent businessman, as the Governor of Bangladesh Bank on 26 February. Within less than a week of assuming office, the new Governor has moved swiftly to address the grievances of the trading and manufacturing communities.
The central bank issued two distinct directives on Tuesday (3 March), both aimed at easing the financial burden on the industrial sector. In addition to the loan renewal flexibility, a second circular introduced a special one-year credit facility specifically designed to help export-oriented industries settle the salary arrears of their workforce for the month of February.
Key Policy Updates at a Glance
| Policy Feature | Previous Regulation | New Regulation (March 2026) |
| Renewal Condition | Mandatory repayment of over-limit amounts | Renewal allowed until “Bad/Loss” classification |
| Eligibility Duration | Immediate enforcement | Valid until 2027 |
| Export Support | Standard credit terms | Special 1-year loan for February salaries |
| Primary Beneficiary | Banks (Risk mitigation) | Businesses (Liquidity support) |
Economic Implications and Context
The decision reflects an acknowledgement by the central bank that rigid classification rules were inadvertently stifling industrial growth. By allowing continuous loans—such as overdrafts and revolving credit—to be renewed despite technical overages, the regulator aims to prevent a spike in non-performing loans (NPLs) that could destabilise the banking sector.
However, some economists warn that such leniency must be balanced with rigorous supervision. While the move is welcomed by trade bodies, the challenge remains for commercial banks to ensure that this “restructuring” does not become a tool for perpetual “evergreening” of unproductive debt.
The introduction of the salary-specific credit line is particularly timely. Following global supply chain disruptions and shifting demand in European and American markets, many Bangladeshi garment exporters have faced delayed payments, making it difficult to meet monthly payroll obligations. This targeted intervention is expected to mitigate industrial unrest and ensure the welfare of thousands of factory workers.