Bangladesh Bank has relaxed loan classification and provisioning norms to create more employment by provisioning or saving resources against distributed small, medium and micro (CMSME) and other defaulters under Non-Banking Financial Institutions.
The central bank issued a circular on Wednesday (December 4) to all non-banking financial institutions and market departments.
According to the circular, a financial institution will have to keep provision at the rate of 5 percent against bad quality or early default loans of CMSME loans. A provision of 20 per cent should be made against doubtful or medium quality defaulted loans and 100 per cent against bad and loss quality defaulted loans.
For all other loans except CMSME loans, provision of 20 per cent against non-performing loans, 50 per cent against doubtful loans and 100 per cent against bad and bad quality loans should be kept.
A provision or provision at the rate of 5 per cent on the balance obtained after deducting the suspended interest from the outstanding balance of the loan account classified under 'Special Mention Account' (SMA). However, in case of CMSME loans, the provision rate will be 0.25 percent.
