Bangladesh Bank has unveiled a one-time special repayment facility for eligible overdue borrowers, allowing banks to negotiate settlements on classified loans in a bid to cut mounting bad loans, strengthen banks' balance sheets and boost fresh lending to productive sectors.
The central bank issued a circular today (29 June) permitting scheduled banks to offer the facility to borrowers whose loans were classified as substandard, doubtful or bad/loss as of 30 June 2026, subject to approval by their respective boards and the nature of the banker-customer relationship.
The move comes at a time when the country's banking sector is grappling with over 32% of non-performing loans (NPLs), which has constrained banks' capacity to extend fresh credit to businesses and industries.
In the circular, Bangladesh Bank said productive sectors need greater access to financing to support investment, production and employment generation. However, the rapid growth of overdue loans has weakened banks' asset quality, liquidity management and lending capacity.
Under the facility, eligible borrowers will have to repay their outstanding liabilities in a single lump-sum payment to qualify for the settlement. Banks will be allowed to provide the facility based on individual borrower-bank relationships and after obtaining necessary approvals from their boards.
The circular also stipulates that existing Bangladesh Bank guidelines governing the waiver of accrued and unaccrued interest will remain applicable. Banks will therefore have to follow prescribed rules before offering any interest relief to borrowers.
However, not all classified loans will qualify for the scheme. Borrowers whose loans were fully rescheduled between 6 August 2024 and 30 June 2026 will not be eligible for the special facility. In addition, short-term agricultural loans and loans extended to cottage, micro, small and medium enterprises (CMSMEs) have been excluded from the programme.
Bankers say the initiative could encourage some borrowers to settle long-standing liabilities that have remained stuck in the banking system for years, helping banks recover cash and improve the quality of their loan portfolios.
The central bank has directed banks to complete all necessary documentation and due diligence before extending the facility to any borrower.
The special repayment scheme will remain effective until 31 December 2026.
The latest initiative reflects Bangladesh Bank's continued efforts to tackle the country's growing bad-loan problem without resorting to a broad-based loan amnesty. By encouraging negotiated settlements and cash recoveries, the regulator hopes banks will be able to clean up their balance sheets and redirect funds towards new lending, supporting economic activity and job creation.
bad loans / loans
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