Credit rating not required to borrow from stimulus package

Banks now can finance coronavirus-struck large and medium-scale industries and the service sector from the Tk30,000 crore stimulus package, without maintaining internal credit risk rating of a borrower.

Previously, the central bank had imposed conditions for this fund that a borrower must get at least marginal rated evaluation of its immediate past year's business activities under the guidelines of internal credit risk rating system of banks.

Generally, banks can finance only "Excellent" and "Good" rated borrowers as per the guidelines. "Marginal" rated borrowers get loans under special consideration and "Unacceptable" rated customers are not allowed to get any bank loans.

The central bank in a circular on Sunday said it has become a time-consuming matter for banks to complete the internal credit risk rating after collecting required documents from borrowers as banks' activities have slowed due to Covid-19.

In that case, the Bangladesh Bank has suggested banks to select borrowers on the basis of banker-customer relationship, analysing credit risks following their own guidelines.

On May 2, the Bangladesh Bank relaxed loan disbursement rules under the Tk30,000 crore stimulus package, giving banks 10 days after every quarter to adjust the extra amount if loans exceed the sanctioned limit.

Before that, banks had just five days after every quarter to adjust loans that exceeded the limit.

According to central bank instructions, total outstanding bank loans – including interest – cannot exceed the sanctioned loan limit of a borrower. If the limit is exceeded, the banks now have to adjust the exceeded amount within 10 days of a quarter's end.

On April 12, the Bangladesh Bank issued a guideline, setting strict conditions for loan disbursement under the Tk30,000 crore stimulus package.

The conditions include maintaining a single borrower exposure limit, loan classification and provisioning rules, and the highest loan limits for both banks and clients.