Bangladesh Bank has extended the maximum repayment period for personal loans from five years to eight years, introducing a significant policy shift aimed at expanding retail lending and making bank credit more accessible to ordinary consumers. Banking sector experts believe the move will reduce borrowers’ monthly repayment burden while enabling customers to secure larger loans without substantially increasing their financial strain.
The central bank announced the decision through a circular issued on Thursday, alongside several other revisions to its consumer lending framework. The latest measures reflect an effort to stimulate retail credit growth at a time when consumer financing is expected to play a greater role in supporting domestic economic activity.
One notable change is the removal of an earlier regulatory requirement that obliged banks to explain to Bangladesh Bank whenever the growth of their consumer loan portfolio exceeded their overall credit growth. With that restriction now withdrawn, banks are expected to enjoy greater operational flexibility in expanding retail lending, allowing them to respond more effectively to market demand.
According to bankers, extending the repayment tenure by three additional years will substantially lower monthly instalments for borrowers. This is expected to improve loan affordability for salaried employees, small business owners and middle-income households, many of whom have faced tighter financial conditions in recent years. Lower monthly repayments may also encourage customers who were previously hesitant to borrow because of high instalment obligations.
The latest reforms follow another major policy decision introduced by Bangladesh Bank earlier this year. Taking into account rising market prices and increasing consumer demand, the central bank doubled the ceiling for consumer loans. Under the revised framework, banks are now permitted to offer consumer loans of up to Tk 4 million, compared with the previous maximum limit of Tk 2 million. Loans extended against customers’ deposits remain outside this ceiling.
The central bank has also expanded financing opportunities in the automotive sector, particularly for environmentally friendly vehicles and domestically manufactured cars. Banks may now provide loans of up to Tk 8 million for the purchase of locally produced vehicles, electric vehicles and hybrid vehicles. Previously, the Tk 8 million financing limit applied only to electric and hybrid models. By extending the same facility to locally manufactured vehicles, Bangladesh Bank aims to encourage domestic automobile production while supporting industrial development.
The maximum loan limit for conventional fossil fuel-powered vehicles, however, remains unchanged at Tk 6 million. The distinction in financing limits reflects the central bank’s broader objective of promoting cleaner transport technologies while simultaneously strengthening local manufacturing capacity.
The revised guidelines also introduce clear financing ratios for vehicle purchases. Buyers of conventional fuel-powered vehicles may receive bank financing covering up to 60 per cent of the purchase price, with the remaining 40 per cent to be provided from their own funds. For example, a customer purchasing a vehicle worth Tk 10 million would be eligible for a maximum bank loan of Tk 6 million and would need to contribute Tk 4 million personally.
In contrast, buyers of electric, hybrid and locally manufactured vehicles will benefit from a significantly more favourable financing structure. Banks may finance up to 80 per cent of the vehicle’s value, leaving customers responsible for only the remaining 20 per cent. For a vehicle priced at Tk 10 million, this would allow financing of up to Tk 8 million, with the purchaser contributing Tk 2 million.
Banking analysts believe these coordinated policy measures could inject fresh momentum into Bangladesh’s retail lending market. The combination of longer personal loan repayment periods, higher consumer loan limits and enhanced financing for environmentally friendly and locally manufactured vehicles is expected to improve access to formal credit while encouraging responsible consumer spending.
The reforms are also seen as supporting broader economic priorities. Easier access to financing could strengthen household purchasing power, stimulate demand in key sectors and contribute to the growth of domestic industries. At the same time, the preferential treatment for electric, hybrid and locally produced vehicles aligns financial incentives with environmental sustainability and industrial development objectives, signalling Bangladesh Bank’s intention to balance consumer access with long-term economic and environmental goals.