In a bid to boost up the sluggish economy the central bank on Wednesday eased up loan provisioning and rescheduling rules.
According to the central bank assessment, a reduction in loan provisioning requirement would create an additional Tk 500 crore investable funds to the banks. The rescheduling time has also been relaxed to six years instead of present four and a half year.
“We have made the adjustments in loan provisioning and rescheduling rules after a rise in classified loans,” SK Sur Chowdhury, deputy governor of Bangladesh Bank (BB) told a news briefing at the BB.
In another major move, the BB has decided to create a fund of Tk 900 crore from its earnings to help the ailing capital market gets vibrant, Chowdhury said.
“We have relaxed the rules for the sake of the economy,” said the deputy governor. Classified loans have increased by 2 percentage points due to new loan rules, he pointed out.
Under the new rules, a bank has to make provision just 1 percent instead of 5 percent for a special mention account or SMA. The provisioning requirement will be 2 percent for housing, professional and investment banks (merchant banks and brokerage house).
Total rescheduling time has also been extended to 6 years instead of present 4.5 years, Chowdhury said. The latest amendment said the time limit for first rescheduling of a classified loan would now be 36 months since the repayment of last installment instead of present 24 months. The time limit has been reset at 24 months and 12 months for second and third rescheduling respectively.
On the formation of Tk 900 crore fund for the capital market, he said the amount will be transferred to the government accounts from the BB accounts.
“This will be a budgetary allocation. Government will manage and operate the fund,” said Chowdhury.
According to the BB, the fund will be provided to the merchant banks under a refinance scheme in three phases – Tk 300 crore each. Merchant banks, which incurred losses for waiving interest rates to small investors in the stockmarkets, will get loans from this low-cost fund.
Source: The Daily Star