Bb Tightens Policy On Waiver Of Interest On Loans

Bangladesh Bank Explained Circular on Interest Waiver

BB Tightens Policy on Waiver of Interest on Loans

The Bangladesh Bank (BB) has issued a circular to clarify its earlier instructions on interest waivers. The move aims to prevent unrestrained waivers by banks.

Key Points of the Circular

• A waiver is a legal document that outlines the intentional surrender of a claim or right.
• Banks must follow specific guidelines when granting interest waivers.
• The new guidelines aim to prevent excessive use of interest waivers by banks.

Background

The BB had previously instructed banks to provide interest waivers to borrowers affected by the COVID-19 pandemic. However, the central bank found that some banks were granting waivers excessively.

Revised Guidelines

The revised guidelines issued by the BB include the following requirements:

• Banks must clearly define the criteria for granting interest waivers.
• Waivers must be granted only in exceptional circumstances and must be justified by the borrower's financial situation.
• Banks must document the reasons for granting interest waivers and maintain a record of such waivers.

Impact on Banks and Borrowers

The new guidelines are expected to have a significant impact on banks and borrowers.

• Banks will need to be more cautious when granting interest waivers.
• Borrowers will need to demonstrate genuine financial hardship to qualify for interest waivers.

The BB's move is intended to ensure that interest waivers are used appropriately and to prevent abuse by banks or borrowers.

Conclusion

The BB's circular on interest waiver is a significant development that will affect banks and borrowers. The new guidelines aim to prevent excessive use of interest waivers by banks and ensure that waivers are granted only in genuine cases of financial hardship.