RESTRICTION ON EXTENDING THE TERM TO MATURITY OF A TERM LOAN: BRPD Circular No. 15 dated September 23, 2012

The term to maturity of a term loan may be extended subject to the following conditions and restrictions:

a) The loan must be performing ( Unclassified: Standard or SMA )

b) The decision should be made at the level where the loan was originally sanctioned

c) The maturity date may be extended by a period of time not exceeding 25% of the current remaining time to maturity

CLASSIFICATION AND INTEREST SUSPENSE OF RESCHEDULED LOANS: BRPD Circular no. 15, dated September 23, 2012

Rescheduled loans may be put into any category of classification by the bank considering the existing financial soundness and repayment capacity of the borrower, subject to the accumulated amount in interest suspense account not being taken into income account, unless actually realized. Upon classification, applicable provisions have to be maintained, according to the Master Circular: Loan Classification and Provisioning (BRPD Circular No. 14/2012). These classifications will be reviewed by Bangladesh Bank inspectors. However, regardless of the classification category into which the loan is placed by the bank, a rescheduled loan will not be considered a "defaulted loan," and the borrower will not be considered a "defaulted borrower" as these terms are understood in the context of section 27KaKa(3) [read with section 5(GaGa)] of the Banking Companies Act, 1991, unless such loan has not been repaid after reaching the maximum number of allowable reschedulings. Interest accrued on rescheduled loans will be subject to the accounting treatment that is appropriate for the classification category of the loan, in line with the Master Circular: Loan Classification and Provisioning (BRPD Circular No. 14/2012) just as if the loan had not been rescheduled.

Downpayment requierment for rescheduling in Bangladesh

As per BRPD circular no. 15, September 23, 2012, Down payment requirement for rescheduling is as under:

DOWN PAYMENT OF TERM LOANS:

 a) Application for first time rescheduling will be taken into consideration upon receiving cash payment of at least 15% of the overdue installments or 10% of the total outstanding amount of loan, whichever is less;

 b) Application for second time rescheduling will be considered upon receiving cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan, whichever is less.

 c) Application for rescheduling third time will be considered upon receiving cash payment of minimum 50% of the overdue installments or 30% of the total outstanding amount of loan, whichever is less.

 d) The rate of down payments for Short-term Agricultural and Micro-Credit will be same as above.

Explanation: If any loan is rescheduled for one time before issuance of this circular, the conditions set forth in this circular for second time rescheduling of such loans shall be applicable. Likewise, the terms for third time rescheduling as per this circular for rescheduling of any loan, which has already been rescheduled twice or more shall be applicable.

DOWN PAYMENT OF DEMAND AND CONTINUOUS LOAN:

a)      If a Demand or Continuous Loan is converted into a Term loan, first rescheduling may take place against down payment on the basis of loan amount in the following manner.

Amount of Overdue Loan	Rate of Down payment
Up to Tk.1.00 (one) crore	15%
Above Tk.1.00(one) crore and up to Tk.5.00(five) crore	10% (but not less than Tk.15.00 lac)
Above Tk. 5.00(five) crore	5% (but not less than Tk.50.00 lac)

Application for rescheduling will be taken into consideration only after the amount for the down payment is paid in cash as narrated in 01(c).

b) If any Continuous or Demand Loan is rescheduled for the second time (first time after being converted partly or wholly into Term Loan) and the repayment installments are fixed, the application for rescheduling of such loans shall be considered upon receiving cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan, whichever is less. Similarly, for third rescheduling (second time after being converted partly or wholly into Term Loan) minimum 50% of the overdue installments or 30% of the total outstanding amount of loan, whichever is less, shall have to be repaid in cash.

TIME LIMIT FOR RESCHEDULING: Ref. BRPD Circular no. 15 dated September 23, 2012

The rescheduling shall be for a minimum reasonable period of time. Time limit for rescheduling of different categories of loans will be as follows:

(Note: These time limits are absolute maximums only, and banks are encouraged to establish shorter time limits in their internal policies. Each loan that is being considered for rescheduling should be evaluated on its own merits and not automatically rescheduled for the maximum time period or rescheduled for the maximum number of three (03) times.)

a) Time limit for rescheduling Continuous Loan:

The loan account in which transactions may be made within certain limit and have an expiry date for full adjustment will be treated as Continuous Loan:

Frequency	Classified as Sub-standard	Classified as Doubtful	Classified as Bad/Loss
First Rescheduling	Maximum 18 (eighteen) months from the date of rescheduling	Maximum 12 (twelve) months from the date of rescheduling	Maximum 12 (twelve) months from the date of rescheduling
Second Rescheduling	Maximum 12 (twelve) months from the date of rescheduling	Maximum 09 (nine) months from the date of rescheduling	Maximum 09 (nine) months from the date of rescheduling
Third Rescheduling	Maximum 06 (six) months from the date of rescheduling	Maximum 06 (six) months from the date of rescheduling	Maximum 06 (six) months from the date of

Conditions: During the rescheduled period all required principal and interest payments must be made. Rescheduled amount should be repaid in monthly installments. If the amount of defaulted installments is equal to the amount of 3(monthly) installments, the loan will be classified as Bad/Loss.

b) Time limit for rescheduling Demand Loan:

The loan which becomes repayable on demand by the bank is treated as Demand Loan. If any contingent or any other liabilities are turned to forced loan (i.e. without any prior approval as regular loan) those too will be treated as Demand Loans:

Frequency	Classified as Sub-standard	Classified as Doubtful	Classified as Bad/Loss
First Rescheduling	Maximum 12 (twelve) months from the date of rescheduling	Maximum 09 (nine) months from the date of rescheduling	Maximum 09 (nine) months from the date of rescheduling
Second Rescheduling	Maximum 09 (nine) months from the date of rescheduling	Maximum 06 (six) months from the date of rescheduling	Maximum 06 (six) months from the date of rescheduling
Third Rescheduling	Maximum 06 (six) months from the date of rescheduling	Maximum 06 (six) months from the date of rescheduling	Maximum 06 (six) months from the date of rescheduling

Conditions: During the rescheduled period all required principal and interest payments must be made. Rescheduled amount should be repaid in monthly installments. If the amount of defaulted installments is equal to the amount of 3(monthly) installments, the loan will be classified as Bad/Loss.

c) Time limit for rescheduling Fixed Term Loan:

The loan which is repayable within a specified time period under a prescribed repayment schedule is treated as Term Loan.

Frequency	Classified as Sub-standard	Classified as Doubtful	Classified as Bad/Loss
First Rescheduling	Maximum 24 (twenty four) months from the date of rescheduling	Maximum 18 (eighteen) months from the date of rescheduling	Maximum 18 (eighteen) months from the date of rescheduling
Second Rescheduling	Maximum 18 (eighteen) months from the date of rescheduling	Maximum 12 (twelve) months from the date of rescheduling	Maximum 12 (twelve) months from the date of rescheduling
Third Rescheduling	Maximum 12 (twelve) months from the date of rescheduling	Maximum 09 (nine) months from the date of rescheduling	Maximum 09 (nine) months from the

Conditions: During the rescheduled period all required principal and interest payments must be made. Rescheduled amount should be repaid in monthly/quarterly installments. If the amount of defaulted installments is equal to the amount of 6 monthly or 2 quarterly installments, the loan will be classified as Bad/Loss.

 d) Time limit for rescheduling for Short-term Agricultural and Micro-Credit

First Rescheduling	Repayment time limit for rescheduling should not exceed 2 (two) years from the date of rescheduling.
Second Rescheduling	Maximum 1(one) year from the date of rescheduling.
Third Rescheduling	Maximum 6(six) months from the date of rescheduling.

e) If the loan becomes default after third rescheduling, the borrower will be treated as a habitual loan defaulter and the bank shall not consider for further loan rescheduling.

f) Approval of loan rescheduling cannot be made below the level at which it was originally sanctioned. A detailed appraisal report including implications of such loan rescheduling on the income and other areas of the bank must be placed to the approving authority at the time of placing the rescheduling proposal.