BB issues circular lowering provisioning against unclassified loans

BB issues circular lowering provisioning against unclassified loans

Bangladesh Bank has lowered provisioning against unclassified loans of all categories under consumer financing, except housing finance, aimed at boosting retail spending in the wake of the novel coronavirus-induced economic slowdown, reports UNB.

Banks and other financial lenders will now have to maintain two per cent general provision against unsecured loans instead of the earlier five per cent. Unclassified loan is a regular loan.

A Bangladesh Bank circular, issued on Tuesday, said that with a view to meeting emergent demand of consumer loans and to encourage the participation of lenders in this segment, it has now been decided that the banks will have to maintain two per cent general provision against unclassified loans of all categories under consumer financing, excluding housing finance.

“This circular has been issued under the power conferred by Section 45 of Bank Company Act, 1991. This circular will come into force with immediate effect.”

As per the BRPD circular issued on 29 May 2013, banks were required to maintain five per cent general provision against unclassified loans under consumer financing (other than housing finance and loans to professionals).

Under its circular issued on 20 August 2017, banks had to maintain two per cent general provision against unclassified credit card loans.