In a significant move aimed at reviving distressed businesses and reactivating the industrial sector, Bangladesh Bank has introduced a new policy framework providing targeted financial relief to eligible borrowers. The central bank announced the measures in a circular issued last Sunday, signalling a more flexible approach to loan repayment terms.
The circular outlined that, following requests from various banks and stakeholders, borrowers facing financial difficulties would be granted relaxation in down payment requirements and extensions in repayment deadlines. Economists have hailed this initiative as a timely step towards stabilising the country’s struggling industries. However, bankers have cautioned that some borrowers might exploit these concessions opportunistically.
Key Features of the Revised Policy
| Aspect | Details |
|---|---|
| Down Payment Requirement | 50% immediate payment of the original amount, remaining 50% payable within six months |
| Extension of Timeframe | Maximum extension of three months if legitimate reasons justify a delay |
| Interest and Terms | Banks must decide based on existing guidelines, borrower-bank relationship, and regulatory directives |
| Applicable Sector | Risk-prone or financially stressed industrial and commercial enterprises |
Under the revised framework, eligible borrowers can now pay their down payments in instalments, offering much-needed liquidity support. Banks are instructed to exercise caution in determining interest rates and other terms to mitigate potential misuse.
Background and Committee Work
In January of last year, Bangladesh Bank established a five-member committee led by the Executive Director of the Offsite Supervision Division. The committee was tasked with designing policy support for corporate borrowers whose loans were deemed non-performing or beyond regulatory control.
The committee conducted its work through tripartite meetings involving the borrower institutions, financing banks, and committee representatives, concluding its activities on 30 September last year. Earlier, on 16 September, Bangladesh Bank had unveiled an integrated special loan restructuring policy aimed at sustaining economic growth while assisting troubled borrowers.
Practical Impact
According to Bangladesh Bank data, nearly 300 companies applied for loan restructuring in the first nine months of the previous year, involving an estimated Tk 200,000 crore. Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, stated, “This flexibility from Bangladesh Bank could help struggling industrial enterprises recover at a critical time for the national economy.”
Anis A. Khan, former chairman of the Association of Bankers, Bangladesh, added, “Following the formation of the elected government, this policy offers a welcome opportunity to restore production and services to pre-crisis levels. It is crucial to utilise this period for infrastructure rehabilitation.”
Conclusion
Bangladesh Bank’s new policy framework provides borrowers with the opportunity to restart business operations with renewed vigour. The combination of down payment relief and extended repayment timelines is expected to play a pivotal role in reviving the industrial sector, ultimately contributing to the restoration of the national economy and a more dynamic business environment.