The Bangladesh Bank (BB) has made some changes in its classification loan (CL) forms to strengthen credit discipline in line with international standards, official sources said. The central bank has included credit under general provision in the Special Mention Account (SMA) at five per cent and small enterprise and consumer financing at two per cent in the loan classification and provision reporting system. The BB has already issued a circular in this connection and directed the chief executives of all scheduled banks to introduce the new forms for reporting on such loans. The amended CL forms will be effective from December next, sources in the central bank said. "Such amendments to CL forms will help maintain discipline and transparency in credit management in the banking sector," a BB senior official told the FE Tuesday. Under the existing provisions, the banks have to maintain provision at 20 per cent for sub-standard loans while 50 per cent and 100 per cent provision will be kept against doubtful and bad loan portfolios respectively. The banks will be required to make general provision at five per cent on the outstanding amount of loans kept in the SMA after netting off the amount of interest suspense. The status of SMA should be reported to the Credit Information Bureau (CIB) of the central bank. However, it is reiterated that loans in the SMA will not be treated as defaulted loans. Loans will have to be classified into four categories in place of five categories. The 'unsatisfactory' category will be rescinded in cases of small enterprises and consumer financing. However, interest on SMA should be credited to 'Interest Suspense Account' instead of income account. The banks will be required to maintain two per cent general provision against such unclassified loan amount.
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