Bangladesh Bank has recently issued new guidelines aimed at facilitating the recovery and financial stabilisation of institutions affected by non-performing loans. Under the previous framework, borrowers applying for loan restructuring were required to pay the full advance amount in a single instalment. The revised policy eases this requirement, allowing the advance to be disbursed in two separate instalments. This adjustment significantly reduces the immediate financial burden on borrowers.
Details of the Revised Advance Payment Policy
According to the updated guidelines, applicants may now split the advance payment into two portions. The first instalment will cover 50% of the total advance, with the remaining 50% payable within six months. In addition, institutions approved by the Policy Support Committee, which were unable to comply within the prescribed timeframe for valid reasons, will be granted an extra three-month period to fulfil the requirement.
The following table summarises the key changes:
| Aspect | Previous Rule | New Rule | Additional Time |
|---|---|---|---|
| Advance Payment | 100% payable at application | 50% first instalment; 50% within six months | – |
| Policy Support Committee-Approved Institutions | Must comply within prescribed time | Prescribed time + extra three months | 3 months |
| Interest Waiver Decisions | Based on bank-customer relationship | Same rule applies | – |
Implementation and Impact
Officials from Bangladesh Bank have highlighted that the requirement to pay the full advance in a single tranche was extremely challenging for many distressed businesses. Allowing payment in two instalments will considerably alleviate the financial pressure on borrowers. Furthermore, banks that have yet to implement Policy Support Committee-approved facilities will benefit from the additional three-month extension.
Decisions regarding interest waivers will continue to be determined by the bank’s board, based on the specific bank-customer relationship. This flexibility is intended to assist institutions in restructuring their operations and restoring financial stability.
Broader Implications
The new directives are primarily designed to streamline the loan restructuring process for at-risk businesses while enhancing overall economic stability. Experts anticipate that the introduction of two-stage advance payments and the extension of compliance deadlines will encourage more institutions to apply for restructuring, thereby expediting the process.
Overall, the reforms are expected to benefit both borrowers and banks. They represent a significant step toward stabilising the national economy, increasing participation in financial restructuring, and ensuring the effective management of restructured loans.