Written by The Banking Post
Bangladesh Bank has cut provisioning requirements for short-term loans in the agricultural and cottage, micro, small and medium enterprise (CMSME) sectors, aiming to encourage banks to step up lending to these priority areas.
Under a directive issued on Sunday, the central bank set a uniform provisioning rate of 0.50 per cent for all unclassified loans, including standard and Special Mention Accounts (SMA), in the two sectors. The reduced rate will remain in force until December 31, 2026, providing medium-term relief to lenders.
Previously, banks were required to keep provisions of 1 per cent against standard loans and 5 per cent against SMAs under existing regulations. The easing is expected to lower banks’ capital costs and improve their appetite for extending short-term credit to farmers and small businesses.
The new directive takes effect immediately and has been issued under the Bank Company Act, 1991. It replaces earlier instructions on the same issue, while all other rules on loan classification and provisioning remain unchanged.
