Payment pause for borrowers likely to be extended further

The Bangladesh Bank is likely to further extend the moratorium on the payment of loan instalments in the face of mounting pressure from the business community amid a slowdown in economic activities due to a second wave of infections.

Quarterly instalment payment against term loans is supposed to start from March after the payment deferral facility was lifted in January this year.

Now, business people are pursuing the central bank to extend the payment pause till June.

When contacted, a senior executive of the Bangladesh Bank said they will reconsider extending the facility after analysing the payment situation of banks.

Not all borrowers will be given the payment deferral facility, the official said, adding that the central bank is working on how to provide the facility.

"Bankers are not willing to extend this facility, while the business community wants it. So, the central bank will find a way to balance the two scenarios," he added.

In March last year, the central bank suspended loan classification aiming to support businesses affected by the pandemic. Borrowers enjoyed the payment pause facility throughout 2020.

The moratorium expired on 1 January this year and the Bangladesh Bank lifted the facility, analysing the payment situation, loan recovery and profitability of banks.

Analysing the payment situation, the central bank found that although the instalment deferral facility was effective for a total loan of Tk10,95,000 crore, the policy relaxation facility was given by 49 banks for only Tk2,55,386 crore.

The loan recovery situation also seemed impressive as only 23% of borrowers availed the instalment deferral facility against which the loan recovery rate was 14.37%.

The recovery rate shows that borrowers who did not take the payment deferral facility could continue interest payments.

The payment deferral helped reduce default loan to 7.66% in December last year, which was 9.32% in the same period of previous year.