The amount of defaulted loans in the country’s banking sector dropped by Tk 1,821 crore in the January-March quarter of the year 2020, riding on a Bangladesh Bank instruction that barred banks from downgrading loan classification even if the borrowers fail to repay loan installments during the January-September period amid the coronavirus pandemic.

As a result, the amount of defaulted loans in the banking sector dropped to Tk 92,510 crore at the end of March this year.

The defaulted loans in the banking sector shot up to an all-time high at Tk 1,16,288 crore at the end of September, 2019 but dropped to Tk 94,331 crore as of December 31, 2019, thanks to the government’s easy loan rescheduling policy.

Under the relaxed policy offered in 2019, the borrowers were allowed to reschedule defaulted loans with just 2 per cent down payment, much lower than the regular down payment requirement to reschedule defaulted loans.

The central bank this year, immediately after the outbreak of coronavirus in the country, has barred banks not to downgrade any loan for the borrowers’ failure to pay installments in the January-September period this year.

The banks, however, were asked to upgrade loans during the period if the borrowers repay loan installments.

Because of the policy relaxations, the volume of defaulted loans in the country’s banks dropped in two consecutive quarters without any significant recovery.

Instead, the loan installment payments by the borrowers have deteriorated significantly since January this year.

Bankers, however, cautioned that the situation would deteriorate further in the coming days.

The central bank in a recent circular said that the borrowers would get time extension for loan installment payment for the months between January and September in which they would fail to repay.

Even after the policy relaxation, bankers were in a fear that the defaulted loans would increase when the policy relaxation would be withdrawn.

Besides, many businesses have been incurring losses as the country was on shutdown due to the coronavirus pandemic for around two months when the trade and business ground almost to a halt.