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The Microcredit Regulatory Authority (MRA) asked the microfinance institutions (MFIs) to provision one per cent fund on total loan loss.
The microcredit regulator also asked the MFIs not to classify loans until December 31 even if the borrowers fail to pay back those as per the schedule.
MRA Director Yakub Hossain issued a circular in this regard on Wednesday.
According to the circular, the microlenders cannot force the borrowers to pay instalments during the time.
The regulatory body came up with the decision, as the coronavirus pandemic continues to batter the economy with no sign of stopping.
On September 29, the Bangladesh Bank gave the same instruction to all the banks.
Earlier, the central bank and the MRA had relaxed the loan classification policy until June 30 and September 30 respectively.
Buro Finance Director Mosharraf Hosain, a renowned NGO-MFI personality, said it is totally an unfair decision for the sector, as the sector is already suffering due to the negative impact of the Covid-19 pandemic.
He said the MRA has not discussed this issue with stakeholders. “We will request the regulator to withdraw the decision,” he added.
A loan loss provision is an income statement expense, set aside as an allowance for uncollected loans and loan payments.
This provision is used to cover different kinds of loan losses, such as non-performing loans, customer bankruptcy, and renegotiated loans that incur lower-than-previously-estimated payments.
Loan loss provisions are then added to the loan loss reserves, a balance sheet item that represents the total amount of loan losses subtracting a company’s loans.
(FE)
