Bangladesh Bank (BB) has changed its loan reporting format for Non-Bank Financial Institutions (NBFIs) allowing borrowers in the housing sector more time to repay their loan installments, while from now, non-payment of such installments for 18 months will not be considered a default.
If the term of an unpaid instalment is more than one and half years or 18 months, it will be considered as the initial stage of default loan and after 36 months or three years, such loan will be considered as 'bad' quality default loan, according to a circular of the central bank.
The circular, which was sent to the chief executives of all the country's financial institutions, will be effective from September 2021.
BB has issued the circular to update various issues related to loans, defaulters and provisions of financial institutions.
NBFIs have been directed to prepare default reports on short-term loans, lease finance, term loans and housing loans every quarter. They have been instructed to submit this information of March, June, September and December to the designated branch of Bangladesh Bank within the next 30 days.
As per the guidelines, fully repayable loans within 12 months are 'short term loans, term loans based on the purchase of machinery, motor vehicles and other assets are 'lease finance,' all types of loans repayable on a fixed schedule are 'term loans' and loans for buying plots and apartments have been termed as 'housing loans'.
In the case of short-term loans, non-payment of loans for more than three months and less than six months will be considered as 'substandard' ones, unpaid loans for more than six months but less than nine months will be considered as 'doubtful,' and unpaid short-term loans for more than nine months will be considered as 'bad ones.’
In the case of lease finance, non-payment of loans for more than six months but less than 12 months will be considered as 'sub-standard', unpaid loans for more than 12 months but less than 18 months will be considered as 'doubtful' and non-payment of loans for more than 18 months will be considered as 'bad ones.’
In the case of housing loans, non-payment of loan for more than five-year tenure, unpaid loans for more than 18 months but less than 24 months are considered as 'sub-standard', unpaid loans for more than 24 months but less than 36 months are considered as 'doubtful' and non-payment of loans for 36 months or more are considered as 'bad' ones.