Loan moratorium ends with relaxed repayment facility

The loan moratorium facility to cushion the Covid-19 fallout ended on 1 January this year, resuming the classification of loans.  

The central bank's Banking Regulation and Policy Department (BRPD) issued a circular in this regard Sunday.

Due to the pandemic, borrowers did not have to repay loan installments from January to December 2020 and loan classification was paused.

Though the moratorium has ended, the Bangladesh Bank has relaxed the repayment of term loans.

Borrowers for term loans will get 50% extra time to repay the installments till January 1, 2021, said the central bank circular. But the extended period will not be more than two years, and the bank-client relationship will determine the extension.

For instance, a loan with a six-year repayment period finishes two years on 1 January 2021, and has four years for repayment. For it, the borrower now gets six years – the remaining four years plus another two years as 50% of the four years.         

Another loan with 10 years crosses five years of the repayment on 1 January 2021, and has five years for repayment. According to the central bank's circular, 50% of the remaining period is two-and-a-half years. Since the extension will not be more than two years, borrowers will not get seven-and-a-half years, instead, the client will have to repay the loan in seven years.     

Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh and also the current managing director and CEO of Mutual Trust Bank Limited, welcomed the central bank's decision.

"This facility will help industry and service sectors turn around, shrugging off the pandemic-led challenges. The client-bank relationship, in availing the facility, will deter wilful defaulters from taking advantage," he noted.    

Rizwan Rahman, president of the Dhaka Chamber of Commerce & Industry (DCCI), welcomed the central bank's move. But he advocated for continuing the loan moratorium facility for the next six months.

"The pandemic is not over, and the fallouts are likely to prevail this year too. It will be convenient for us if the loan moratorium is extended," he added.

The business leader is especially in favour of extending the facility for the cottage, micro, small and medium enterprise sector. He said the facility for the sector should continue throughout 2021.

He thinks small and medium ventures should get more six months for repaying their installments.

In the first quarter of the current financial year (July-September), the amount of term loans disbursed to industries was about Tk15,500 crore – which is 30% less than the corresponding quarter of the previous year.

The central bank's circular further said credits other than the term loans will follow the existing policies and stimulus package guidelines.