B Mirror Report: Bangladesh Bank (BB) on Tuesday issued updated guidelines on the rescheduling of housing loans, easing earlier time-bound limitations to provide greater flexibility for borrowers in managing their repayments.

In a circular, the central bank said the revised framework is intended to help borrowers maintain regular installment payments by allowing repayment schedules to better reflect their actual financial capacity.

Under the previous rules, housing loans of up to Tk 100 crore could be rescheduled for a maximum period of six years. This fixed ceiling often led to rescheduled tenures being shorter than the loan’s remaining original term, resulting in a sharp increase in monthly installment amounts.

The new policy removes the six-year cap and instead aligns the rescheduling period with the remaining loan tenure. Bangladesh Bank expects this change to reduce Equated Monthly Installments (EMIs), keeping them within borrowers’ cash-flow limits and lowering default risks.

According to the revised instructions, banks may now determine the maximum repayment tenure based on the specific rescheduling stage. Lenders may also allow a grace period of up to six months, subject to justification based on the borrower’s projected cash flow.

The circular outlines the following repayment tenure structure:

• For the first rescheduling, the maximum period will be the existing remaining term plus 30 percent of that term.
• In the case of a second rescheduling, the limit will be the remaining term plus an additional 20 percent.
• For the third and fourth rescheduling, the repayment period will be restricted to the remaining term only.

To ensure discipline in loan management, the central bank has imposed several mandatory conditions. The total repayment period, including any extensions, must not exceed the original tenure approved at the time of loan sanction. For instance, a loan sanctioned for 20 years cannot be extended beyond 20 years from its original start date.

Banks must also ensure that the loan is fully repaid before the borrower turns 65, with the final installment date strictly falling before the borrower’s 65th birthday. In addition, lenders are required to confirm that all original loan documents are valid and that all relevant regulatory requirements have been complied with prior to approving any rescheduling request.

The circular further addresses cases where rescheduled housing loans are transferred to another bank or financial institution. In such cases, the rescheduling count first, second, or subsequent will continue cumulatively from the previous lender. Banks must obtain a formal declaration from borrowers detailing their rescheduling history to prevent misuse and maintain transparency.

For matters not explicitly covered under the new guidelines, including mandatory down payment requirements, the provisions of BRPD Circular No. 16 of 2022 will continue to apply.

Bangladesh Bank issued the directive under Section 49(1)(ch) of the Bank Company Act, 1991. The instructions are applicable to all scheduled banks in Bangladesh and take effect immediately.