BB eases loan rescheduling rules as default risks mount
A circular in this regard was issued by the Banking Regulation and Policy Department (BRPD)
In a fresh relief for struggling industries, the Bangladesh Bank has eased loan rescheduling conditions, allowing distressed borrowers to pay only half of the required down payment – 2% of the total outstanding loan – upfront and clear the remainder within six months.
A circular in this regard was issued today (22 February) by the Banking Regulation and Policy Department (BRPD).
The decision also allows additional time extensions and gives bank boards greater discretion over interest-related decisions. Analysts say the measures are designed to stabilise banks' balance sheets at a time when bad loans are climbing and credit growth remains weak.
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The circular comes as investment has fallen to multi-year lows and construction activity has slowed sharply. Non-performing loans (NPLs) are hovering above 35%, while borrowing costs range between 14% and 16%.
Against this backdrop, the central bank's decision is widely viewed as an effort to prevent a fresh wave of defaults and give businesses breathing space during a fragile recovery.
Mashrur Arefin, chairman of the Association of Bankers, Bangladesh, said, "While temporary relief can be justified in exceptional circumstances, repeated regulatory forbearance does weaken credit discipline and harm the long-term health of the banking system."
"Capital has a real cost. Continued extensions without strong borrower commitment and equity participation create moral hazard."
"What I fear is such policy signals. They shape behaviour and expectations. They sound like politically motivated decisions," he added. "I call for accountability and market-based discipline, not dependence on repeated regulatory relief."
'Each case is unique'
Sohail RK Hussain, managing director of Bank Asia, said any rescheduling must address the root causes of default.
"If a loan is rescheduled, the root cause must be identified and addressed. If a loan has become overdue and is rescheduled for 10 years, it makes little sense. But if someone has genuinely suffered losses, then the customer must inject new equity. In that case, rescheduling can be meaningful," he said.
He added that under previous regimes, rescheduling was often granted automatically upon application.
"In the past, whenever an application came, loans were rescheduled. Customers effectively enjoyed the bank's money without paying anything. Since every case is unique, this circular gives banks flexibility, but they must implement it prudently," he said.
"If implemented properly, it will be good for the banking sector. If not, it will be harmful," he added.
A deputy managing director of a private bank, speaking on condition of anonymity, said, "Implementing this circular may help lower NPLs, but if customers or businesses do not repay properly, these policy supports will not be effective."
Under the new circular, the Bangladesh Bank also extended the deadline for special loan restructuring. The earlier deadline of 31 December has been pushed back by three months to 31 March 2026.
In addition, decisions regarding interest waivers may now be taken by the boards of the respective financing institutions, within existing policies and based on banker-customer relationships.
