Bangladesh Bank Introduces New Circular on Home Finance and Industrial Term Loan Repayment

Bangladesh Bank has issued a new directive to facilitate the repayment of industrial term loans and home finance loans. The central bank has withdrawn the six-month moving average rate of treasury bills (SMART rate) in May 08,2024 and introduced a globally recognized market-driven interest rate. This change has resulted in an increase in the interest rate, subsequently raising the Equated Monthly Installment (EMI) amounts for loans.

To alleviate the sudden financial burden on customers, Bangladesh Bank has issued a new directive for the repayment of industrial term loans and home finance loans. According to the BRPD circular-29, banks are required to reschedule the number of installments without increasing the repayment amount, applicable only to unclassified loans.

This loan rescheduling will not be considered as a rescheduling under BRPD Circular-16, 2022. However, customers must submit a written application to avail of this facility.

In light of the existing high inflation in the economy, Bangladesh Bank's strategic move aims to enable customers to repay their loans with extended tenures, thereby reducing the likelihood of defaults. At the same time, banks will benefit from the extra interest without causing undue hassle to customers.