Personal Loan Repayment Period Extended to Eight Years

Bangladesh Bank has extended the maximum repayment period for personal loans from five years to eight years in a move aimed at stimulating retail lending and making credit more accessible to individual borrowers. The latest policy changes, announced through a circular issued on Thursday, are expected to ease the financial burden on customers by reducing monthly instalments while encouraging banks to expand consumer lending.

The central bank has also withdrawn an earlier regulatory requirement that compelled banks to explain to Bangladesh Bank whenever the growth of consumer lending exceeded their overall credit growth. Banking professionals believe that removing this restriction will provide greater flexibility for financial institutions to respond to rising consumer demand and expand their retail loan portfolios without additional regulatory hurdles.

According to several bankers, the extension of the repayment tenure will significantly lower monthly repayment obligations, making personal loans more affordable for a broader section of customers. The longer repayment period is expected to improve borrowers’ repayment capacity while allowing individuals to finance larger expenses with greater financial comfort.

The latest measures follow a series of policy revisions introduced by Bangladesh Bank earlier this year to support consumer financing amid changing market conditions and increasing demand for household purchases. At the beginning of last month, the central bank doubled the ceiling on consumer loans, allowing banks to provide up to Tk 4 million in personal loans, compared with the previous limit of Tk 2 million. Loans extended against customer deposits remain exempt from this ceiling.

Alongside the changes to personal lending, Bangladesh Bank has introduced fresh incentives for vehicle financing to support the country’s domestic automobile industry and promote environmentally friendly transport. Under the revised guidelines, banks may now offer auto loans of up to Tk 8 million for the purchase of electric vehicles, hybrid vehicles and vehicles manufactured within Bangladesh. Previously, the higher financing limit applied only to electric and hybrid vehicles, but the latest circular has expanded the facility to include locally produced automobiles.

For conventional vehicles powered by fossil fuels, the maximum loan amount remains Tk 6 million. The revised policy reflects the central bank’s intention to encourage investment in cleaner technologies while simultaneously strengthening local vehicle manufacturing.

The circular also specifies the financing structure that banks must follow when approving vehicle loans. Conventional vehicles will continue to be financed under a maximum debt-to-equity ratio of 60:40. This means a customer purchasing a vehicle worth Tk 10 million can receive a maximum bank loan of Tk 6 million and must contribute the remaining Tk 4 million from personal funds.

In contrast, buyers of electric, hybrid and locally manufactured vehicles will benefit from a more favourable financing ratio of up to 80:20. Under the same Tk 10 million purchase example, a bank may finance Tk 8 million, leaving the customer responsible for only Tk 2 million.

The policy changes signal Bangladesh Bank’s broader effort to strengthen domestic consumption, improve access to retail credit and promote sustainable transport while supporting the growth of local industries. By reducing repayment pressure on borrowers and expanding financing opportunities for priority sectors, the central bank aims to encourage responsible consumer spending without compromising the overall stability of the banking sector.