Bangladesh gives bank loan defaulters until December to repay instalments

Borrowers have got another reprieve amid the coronavirus pandemic after the central bank ordered banking institutions not to classify their loans as bad debts until December.

Bangladesh Bank on Monday issued a circular extending the timeframe for repaying loan instalments.

It had previously barred banks from downgrading any loan until June, meaning the failure of a borrower to repay loan instalments over the first six months of the year would not result in any default.

As the outbreak intensified, the central bank subsequently extended the moratorium for another three months to September.

But the latest decision did not sit well with Khondkar Ibrahim Khaled, former deputy governor of Bangladesh Bank.

Reacting to the order, Khaled said: “What can I say? What is going on in the banking sector? I have no clue what the central bank is doing. This is a sign of the prevailing disorder in the banking sector.”

“The banks are really not in a good state. Yet the banking sector, and the financial sector as a whole, is being thrown into disarray by providing these illogical facilities.”

Highlighting the economic fallout from the coronavirus pandemic, the central bank said that industries, businesses and services were facing difficulties resuming normal operations.

As a result, it has issued new guidelines to determine and classify loans, investment terms and repayment schedules to minimise the burden of the COVID-19 outbreak on borrowers and their businesses.