Person Avoiding Installment for 18 Month Not Be a Loan Defaulter

Even if the housing loan taken from the financial institution is not repaid for 18 months, the customer cannot be called a defaulter. If the term of an unpaid installment is more than one and half year or 18 months, the initial stage of default i.e. ‘low standard’ will be considered. If it is 36 months or three years later, it will be considered as a bad loan.

On Monday (July 26), the Financial Institutions and Markets Department of Bangladesh Bank issued a Master Circular on Classification of Loans and Leases of Non-Bank Financial Institutions and Protection of Resources. It will be effective from September 2021.

The circular, which was sent to the chief executives of all financial institutions operating in Bangladesh, said the circular was issued to make various aspects related to loans, defaulters and provisions of financial institutions more timely and inclusive.

Short-term loans, lease finance, term loans and housing loans have been directed to prepare default reports on a quarterly basis. This information based on March, June, September and December has been asked to be submitted to the designated branch of Bangladesh Bank within the next 30 days.

As per the directives, fully repayable loans within 12 months are 'short term' loans, term loans based on the purchase of machinery, motor vehicles and other assets are 'lease finance', all types of loans repayable on fixed schedule and term are 'term loans' and houses for housing business. Loans for buying plots and apartments have been termed as 'housing loans'.

In the case of a short term loan, an unpaid loan for more than three months and less than six months will be considered as 'low quality', unpaid loan for more than six months but less than 9 months will be considered as 'suspicious' and unpaid short term loan for more than 9 months will be considered as 'bad' or default.