If any bank already transferred interest to the income account, it has to be adjusted through reverse entry
Bangladesh Bank (BB) on Sunday suspended the interest on all types of loans for the months of April and May to help borrowers overcome the economic hit of Covid-19.
As a result, borrowers will not pay the interest for two months against their loans payable to banks, as per a BB circular issued on the day.
“Several stimulus package, including low-interest loans through the banking system have been announced to revive the country’s economic activities in the face of the economic impact of Covid-19,” says the circular.
Now the central bank decided that the interest on all types of bank loans from April 01 to May 31 would have to be transferred to interest-free blocked accounts and not to show those in banks’ income accounts considering the inconvenient situation for Covid-19, it also said.
Until further notice, banks could not impose these two months' interest.
If any bank already transferred interest to the income account, it has to be adjusted through reverse entry.
Talking to Dhaka Tribune, World Bank, Bangladesh former lead economist Zahid Hussain welcomed the central bank’s latest initiative.
“At this moment, the central bank has to take all kinds of initiatives to protect borrowers and small businesses. It will give some breathing space to the borrowers during this crisis period,” said Zahid Hussain.
He said the central bank had to play a proactive roll to implement the stimulus package announced by the government. Small and medium businesses, which were not linked to any bank should be covered by stimulus package, he added.
Earlier on March 20, BB announced that no banks would be allowed to downgrade any loan until June 30, meaning that failure of any borrower to repay loan installments in the January-June period would not result in any default of the borrower.
However, on April 28, Bangladesh Association of Banks (BAB) requested the finance ministry and BB to extend the timeframe from 30 June to 31 Dec 2020 regarding the down gradation of accounts.
On April 15, the BB asked banks not to charge any interest on credit card late fees from March 15 to May 31, this year.
Banks, which already charged or accrued interest on the customer’s credit cards late fees since March 15, had to pay back to customers’ accounts, said a BB circular, issued on the day.
The instruction would be effective from March 15 to May 31, added the circular.