Bangladesh Bank eases rules for borrowers to avoid defaulting

Summary:

According to the recent notice published by the central bank, borrowers will be able to avoid the default zone by repaying 20% of their loan installments by August this year. Three categories of loans will be qualified for this policy.

Content:

In March this year, Bangladesh Bank had provided a repayment deferral support to the borrowers to help them stay out of the default zone. As per the rule, the bank could allow its borrowers to pay 20% of their loans by June, based on their bank-customer relationship.

Bangladesh bank had relaxed the loan classification policy due to the pandemic situation which caused the business slowdown. Now, through a recent notice , the time has been extended till August this year. Borrowers will have to pay only a portion of their loan to be relieved from being a defaulter by August.

However, only three types of loans are classified to be eligible for the relaxed policy. All the borrowers would be able to enjoy the facility, except for the credit card debt, stipulated by a bank manager.

These three types of loans are term, demand and working capital. For the convenience of the readers, all loans have been introduced below:

Term – A term loan is a monetary loan that is repaid in regular payments over a set period of time. Term loans usually last between one and ten years, but may last as long as 30 years in some cases. A term loan usually involves an unfixed interest rate that will add additional balance to be repaid. A term loan is a loan taken for personal or business purposes by a bank or non-banking financial company

There are mainly three types of Term Loans:

  • Short Term Loans. As the name implies, a short term loan is for a brief period, which typically is between 1 to 2 years. …
  • Medium-Term Loans. Medium-term loans last between 2 to 5 years. …
  • Long Term Loans.

Demand: A demand loan is a loan that a lender can require to be repaid in full at any time. This condition is understood by the lender and the borrower from the outset. … Borrowers like the convenience and flexibility associated with demand loans because they can repay them in full or in part at any time, without penalty.

Working capital loan: A working capital loan is a loan that is taken to finance a company’s everyday operations. These loans are not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company’s short-term operational needs.

In March last year, the Bangladesh Bank declared a loan moratorium facility for the banking sector, which was effective throughout last year.

Pic and Article source: https://www.thedailystar.net/business/economy/banks/news/bb-eases-rules-borrowers-avoid-defaulting-2119585

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