Written by The Banking Post
Loan rescheduling has long been used as a lifeline for troubled borrowers in Bangladesh. First introduced in 1991, the policy was meant to help businesses repay loans with down payments and structured instalments. But over three decades later, the system appears to have created as many problems as it solved.
Rules have shifted repeatedly. The central bank tightened conditions in the mid-2000s, then relaxed them again for exporters in 2009. By 2012, banks could reschedule loans up to three times, with tenures stretched to six years. A turning point came in 2019, when defaulters were allowed to reschedule with only a 2% down payment and up to 10 years to repay — what was meant as a one-off exit policy soon became routine.
Covid-19 triggered even more leniency. In 2022, borrowers could reschedule up to four times and stretch repayments to 29 years — a move widely criticised as excessive.
The results have been sobering. By end-2024, Tk3.48 lakh crore in loans had been rescheduled, and nearly 38% of those had already turned non-performing again — up from 24% in 2020. At times, the stock of rescheduled loans has even exceeded officially recognised non-performing loans, leaving banks burdened with a vast pool of “distressed” assets.
Economists warn that frequent rescheduling has encouraged strategic default, as borrowers delay repayments in expectation of repeated concessions. “When rescheduling becomes routine or politically driven, failure is assured,” said one analyst, adding that it undermines credit discipline and traps regulators in a cycle of concessions.
A slight decline in rescheduling in late 2024, after the August regime change, hints at a possible shift. But without structural reforms, experts caution, Bangladesh risks deeper instability in its banking sector.
