Bangladesh Bank (the “BB”) has issued new directions regarding the maximum loan rescheduling time and the amount of minimum down payment through BRPD Circular No. 16 on 18 July 2022 titled “Master Circular on Loan Rescheduling and Restructuring” (the “Master Circular”). The Master Circular has been issued with the view of maintaining stability and recovering the financial sector from the effects of COVID-19 as well as the global economic instability arising from the prolongation of the recent war crises. This has been issued by repealing the previous BRPD Circular No. 15 dated 23 September 2012 and BRPD Circular No. 06 dated 29 May 2013.

Some of the significant directions in the Master Circular are mentioned below:

MAXIMUM TIME OF RESCHEDULING

The Master Circular directs that the classified loans could be rescheduled for a maximum of 03 (three) times and on special consideration, these can be rescheduled up to 04 (four) times.

RESCHEDULING TIME PERIOD LIMIT

The Master Circular provides a fixed time limit which consists of a grace period for rescheduling. The time limit for the 1st and the 2nd rescheduling according to the Master Circular are:

(i) For Term Loans, if the loan amount is less than 100 (one hundred) crore, the highest rescheduling time limit (with grace period) would be 06 (six) years. If the amount exceeds 100 (one hundred) crore but is limited to 500 (five hundred) crore, the highest rescheduling time limit (with grace period) would be 07 (seven) years, and above 500 (five hundred) crore, it would be 08 (eight) years.

(ii) For the Continuous Loan and Demand Loan, if the loan amount is less than 50 (fifty) crore, the highest rescheduling time limit (with grace period) would be 05 (five) years. Nevertheless, if the amount exceeds 50 (fifty) crore but is limited to 300 (three hundred) crore, the highest rescheduling time limit (with grace period) would be 06 (Six) years, and above 300 (three hundred) crore, it would be 07 (seven) years.

However, the Master Circular provides that in subsequent rescheduling for the 3rd and 4th time, the borrowers would get 01 (one) year less respectively from the time limitations mentioned above.

It has been further provided that the maximum period for rescheduling Agricultural Loans and Micro-Credit would be 03 (three) years. For the subsequent rescheduling, it would be 02 (two) years and 06 (six) months.

According to the Master Circular, the grace period would be 06 (six) months based on the banker-customer relationship considering the loan amount. Considering the loss of the borrower, this period may be extended to a maximum of 01 (one) year. It has been further directed that the maximum period would not apply to all the borrowers equally. This would require the proper assessment of the borrower’s loss for such determination by the bank.

RATES OF DOWN PAYMENT

The rates of down payments are as follows:

(i) For the Term Loan, if the amount is less than 100 (one hundred) crore, the down payment rate would be 7% of the overdue installment, and 4.50% of the total outstanding amount of loan. When the amount is more than 100 (one hundred) crore but less than 500 (five hundred) crore, the rate would be 6% of the overdue installment, and 3.50% of the total outstanding amount of loan, and when exceeding 500 (five hundred) crore, the rate would be 5% of the overdue installment and 2.50% of the entire due loan.

However, it has been provided that in case of term loan, the lesser of the total amount calculated against the overdue installments and the total outstanding loan shall be recoverable as minimum down payment.

(ii) For the Continuous Loan and Demand Loan, if the loan amount is less than 50 (fifty) crore, the down payment rate would be 4% of the total outstanding amount of loan. When the amount is more than 50 (fifty) crore but less than 300 (three hundred) crore, this rate would be 3% of the total outstanding amount of loan, but it cannot be less than 02 (two) crore, and when exceeding 300 (three hundred) crore, this down payment rate would be 2.50% of the total outstanding amount of loan, but it cannot be less than 09 (nine) crore.

Nevertheless, in each case of 3rd and 4th rescheduling, the down payment shall be compulsorily 1.00% higher than the rate mentioned above.

The Master Circular however, provides that the minimum down payment requirement cannot be imposed on all borrowers equally. Rather, the rate of down payment should be determined by taking into consideration the actual financial condition and cash flow of the borrower.

TERM LOAN RESTRUCTURING

In case of restructuring of regular term loans, the following conditions, inter alia, are to be observed:

(i) Regarding Regular Term Loans, the maturity date may be extended by a period of time not exceeding 50% of the current remaining time to maturity.

(ii) Term loans can be restructured without taking any down payment.

(iii) Decisions regarding debt restructuring should be approved by the Board of Directors/Executive Committee.

(iv) Rescheduled debt cannot be restructured.