Bangladesh Bank has issued a new directive, providing special facilities for the rescheduling and restructuring of non-performing loans (NPLs).

According to the circular issued on Tuesday, banks can now reschedule defaulted loans for up to 10 years. Borrowers will need to make a minimum down payment of just 2 percent and will receive a two-year grace period.

The interest rate on these loans will be one percentage point lower than the lowest rate in the relevant sector.

The central bank’s circular states that applications for loans exceeding Tk 300 crore can be submitted to a central bank selection committee for policy support. Loans classified as "adverse" as of June 30 of the current year are also eligible for rescheduling, provided the borrower applies to their bank by December 31.

Banks are required to resolve the applications within six months of receipt.

The circular further specifies that for loans rescheduled three or more times in the past, an additional percent 1 percent down payment will be required. While these special facilities do not require Bangladesh Bank's direct approval, they must be approved by the respective bank's board of directors.

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In cases involving loans from multiple banks, the decision must be made with the consent of the lead bank or all concerned banks.

Under the new rules, banks must maintain a general provision for the rescheduled loans based on the banker-client relationship.

However, this facility will not apply to loans created through fraud or deceit. Genuine distressed borrowers will be eligible for rescheduling, restructuring, or a one-time exit facility through a joint review by the bank and the client.

Lawsuits related to these loans must be suspended within 90 days of granting the facility. If any condition is breached, the bank can cancel the facility and take legal action to recover the loan.

This directive from Bangladesh Bank aims to make the process of controlling and restructuring defaulted loans in the banking sector more transparent and effective.