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Those which remain unpaid for a period of 30 months or beyond will now be treated as bad or loss
Bangladesh Bank on Tuesday relaxed loan classification and provisioning rules for the cottage, micro, small and medium enterprise (CMSME) sector to encourage bank lending in the sector.
The central bank circular, issued on the day, said that in the CMSME sector banks would now treat loans as substandard if no installments were paid from six months to 18 months, the latter of which was nine months previously.
Non-payment of loan installments for a period of 18 months or beyond but less than 30 months will now be classified as doubtful, up from 12 months currently.
Those which remain unpaid for a period of 30 months or beyond will now be treated as bad or loss.
As per the new directives, banks will also have to keep 0.25% provision for their regular loans in the CMSME sector; 5% provision for substandard loans; 20% provision for doubtful loans and 100% provision for bad and loss-classified loans.
Currently, banks have to keep 0.50% to 5% provision against defaulted loans of regular category, 20% against substandard category, 50% against doubtful category, and 100% against bad or loss category.
Talking to Dhaka Tribune, Bangladesh Bank executive director Abu Farah Md Naser said: “We relaxed the loan classification and provisioning policy for CMSME sector to encourage participation of the banks in disbursing more loans to entrepreneurs.”
Banks will also get some breathing space owing to the relaxation loan classification and provisioning rules, he added.
As of June 30, banks had disbursed only Tk250 crore in the sector out of the Tk20,000 crore stimulus package, revealed the latest BB data.
However, the central bank instructed banks to implement the stimulus funds by August this year.
(DT)
