DHAKA: Bangladesh Bank (BB) has issued a guidelines for large loan restructuring, allowing more time for the borrowers who are unable to pay back their loans due to ‘unavoidable circumstances’.

The minimum outstanding loan amount should be Taka 500 crore or more in aggregate, the guidelines, issued on Thursday, said.

The guidelines were issued following a board meeting of BB on Tuesday with Governor Dr Atiur Rahman in the chair. The meeting observed that the borrowers affected by ‘various external and domestic factors beyond their control’ require necessary policy support.

According to the guidelines, loans of a particular borrower or group in a bank, singly or in clubbed together form, shall be eligible for restructuring. Borrower having exposure in multiple banks may also approach by forming a consortium. Restructuring facility will be provided to a particular loan account only once.

The restructured loan shall have a maximum tenure of 12 years for term loan and six years for demand and/or continuous loan.

The interest rate, to be charged against the outstanding balance of the restructured loan, may be at a discount from the prevailing declared rate of the bank, but in any case, it shall not be less than the cost of fund plus 01%. The restructured loan shall be paid by the borrower in quarterly installments.

The borrower may be allowed a moratorium period of maximum 12 months within the total tenure of the restructuring. Interest during the moratorium period shall be capitalized.

Restructuring shall be effective upon receipt of down payment in the form of cash of at least 02% of the outstanding amount if such amount is less than Taka 1,000 crore and 01% if the total is Taka 1,000 crore or above.

Reduction of interest liability may be considered by the bank as per existing policy on interest waiver issued by BB from time to time based on the repayment capability of the borrower and adequacy of provision to absorb loss by the bank.

Failure to pay two consecutive installments shall be considered as default and the restructured facility will stand cancelled.

All restructured loans shall be treated as Special Mention Account (SMA) for the purpose of classification. Provision shall be calculated at existing applicable rate of SMA with additional 1%.

Moreover, provision kept on the loan prior to restructuring shall be eligible for transferring to General Reserve Account in case there is provision surplus against all classified loans.

In case of default, the restructured facility shall stand cancelled and the loan shall be classified as per the existing policy. Bank shall take all possible legal steps for recovery of such defaulted loans, failing which may result in bank filing suit under the Bankruptcy Act, 1997.

Any new financing facility or enhancement of existing credit facility subsequent to the restructuring agreement for the business concern or group of companies can be considered by the respective bank in accordance with the Bank Company Act.

Bank shall set up a special cell headed by Head of Recovery for continuous monitoring of the restructured loan and the cell shall submit a quarterly report to the Board of Directors through Risk Management Committee of the Board. This report must contain, among others, compliance progress of the restructuring terms and conditions.

The board of directors of the bank shall review such quarterly report and forward the same along with its specific observations to the Department of Off-site Supervision of BB through the chief executive officer or managing director of the bank.