Dhaka — Bangladesh’s central bank has introduced a sweeping policy overhaul allowing commercial banks to offer generous loan-rescheduling facilities until 30 November, in what appears to be a decisive attempt to rein in the country’s mounting non-performing loans (NPLs).
In a circular issued on Monday, the Bangladesh Bank (BB) relaxed key regulations governing both classified and unclassified loans, widening access to restructuring mechanisms amid growing concerns over financial stability. The directive marks one of the most significant policy shifts in recent years as the banking sector grapples with what officials describe as “unmanageable” NPL buildups.
Under the new rules, banks may offer special rescheduling options of up to 10 years, including a two-year grace period, to borrowers whose loans are classified as substandard (SS), doubtful (DF), or bad/loss (BL) as of 30 November.
Previously, the eligibility cut-off date was 30 June 2025.
To access the facility, borrowers must make a down payment of 2% of their outstanding loan amount. The circular clarifies that earlier instalment payments cannot be counted towards this down payment—a provision intended to prevent misuse of the scheme.
Special Restructuring and Exit Flexibility
The BB has also eased rules for unclassified borrowers who are facing financial distress. These borrowers may apply for a special loan-restructuring facility until 31 December next, and banks may extend the repayment period by up to two additional years under approved guidelines.
In another notable relaxation, the central bank has expanded the special exit facility, enabling classified borrowers who settle their dues through this mechanism to have their loan status changed to unclassified. Such borrowers will now also be eligible for non-funded banking facilities, including the opening of letters of credit (LCs)—a move expected to help revive import-dependent businesses.
A Direct Response to Rising NPL Alarms
This policy shift follows a high-level meeting held 12 days earlier between BB officials and top executives of commercial banks. During the meeting, central bankers urged immediate action to curb the alarming rise in bad loans by accelerating cash recovery and utilising available policy tools to revive struggling enterprises.
According to senior banking sources, Bangladesh’s NPL ratio surged beyond 30% by the end of September, startling members of the visiting IMF review mission. The dramatic escalation in defaulted loans has intensified pressure on the banking regulator to intervene decisively.
Industry Reaction: Relief and Cautious Optimism
Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank PLC, welcomed the interim government’s measures, noting that banks previously had to approach the central bank frequently for approval of such restructuring facilities.
“Now banks can decide more efficiently and support struggling borrowers based on established bank-client relationships,” he said.
Another bank chief, speaking on condition of anonymity, predicted that the relaxation is aimed squarely at containing the “mammoth” rise in NPLs.
“We may see a significant shift in NPL figures by the end of the year,” he added.
A Critical Turning Point for the Banking Sector
Analysts say the central bank’s decision reflects mounting urgency as NPLs continue to swell, undermining credit flow, weakening balance sheets, and threatening economic recovery. By easing rescheduling and exit rules, authorities hope to stabilise the banking sector while giving distressed businesses a lifeline.
With IMF scrutiny intensifying and public confidence wavering, the coming months will reveal whether these measures can arrest the growing default crisis—or merely delay a deeper structural reckoning.