Banks cannot show interest as income without recovering principal

0

Bangladesh Bank has banned banks from posting interest earned on a rescheduled default loan in their revenue accounts until they fully recover the principal amount.

Meanwhile, provisions against the third and fourth rescheduling of bad debts cannot be transferred to revenue accounts without recovery of the principal amount, the central bank said in a circular issued on Wednesday, making some additions and clarifications in some areas. of its recent circular on loan rescheduling.

Under previous central bank policy, in the event of rescheduling of delinquent loans, banks could recognize interest income in their revenue accounts even if the principal amounts remained unrealized.

Also, under the revised policy, a rescheduled loan will be directly classified as an impaired loan if six monthly payments (including principal and interest) and two monthly payments remain unpaid.

Previously, a rescheduled loan could be called a bad loan after around 15 months of non-payment.

According to the new policy, the Bangladesh Bank can make a final decision on the classification of a rescheduled loan after verifying whether the appropriate conditions have been met during its inspection. But this was not specified in the previous circular.

In addition, a clause has been newly added to section 9 of the previous circular: when rescheduling and restructuring any loan, approval must come from a higher level than where the loan was originally approved. . At the same time, the head office of the bank must be notified.

However, if a loan is approved by the bank’s board, it must be rescheduled and restructured by the board.

In addition to loans granted to the agricultural sector and to artisanal, micro and small enterprises, the approval of the bank’s board of directors is essential to reschedule any loan for the 3rd and 4th time.

Share.

About Author

Comments are closed.