Bangladesh Bank eases loan exit policy for defaulters

Bangladesh Bank has further relaxed its loan exit policy, reducing the required down payment from 10 per cent to 5 per cent after a lacklustre response.

The central bank issued a new policy in July 2024, allowing defaulters to clear their loans in phases and exit the default status.

The Banking Regulation and Policy Department (BRPD) sent a notification on Monday to all bank CEOs and managing directors, introducing fresh relaxations.

A senior Bangladesh Bank official said the relaxation was introduced due to the policy’s initial weak response.

Under the new terms, defaulters can repay their loans over three years by making an initial payment of just 5 per cent, down from 10 per cent.

While bank boards or executive committees must approve exit facilities, bank management can also approve loans of up to Tk 2 million under this scheme, doubling the previous Tk 1 million limit.

However, the policy does not allow partial payments to reclassify a loan as regular.

Borrowers remain listed as defaulters until full repayment and cannot take new loans during this period.

Banks will structure repayment schedules based on customer relationships, with a maximum two-year repayment period, extendable by another year under board approval.

As of December 2024, non-performing loans, or NPLs, in the banking sector stood at Tk 3.45 trillion.

POLICY HIGHLIGHTS

• The borrower’s credit status remains unchanged until full repayment.
• Defaulters using the exit scheme will not be labelled as "wilful defaulters”.
• Banks must process applications within 60 days.
• Waived interest must be recorded separately and written off after full loan settlement.
• Borrowers failing to meet repayment terms will face legal action.