Loan-rescheduling has become a common practice in Bangladesh. Loan-rescheduling is the process of re-fixing outstanding loan repayment terms and extending the maturity. Is it rational to reschedule a defaulted loan? The answer is "it depends".
When a borrower is defaulter, his loan may be classified or rescheduled. If a borrower is classified, his classification status is reported to Credit Investigation Bureau of Bangladesh Bank. The significance of classification is that a classified borrower cannot obtain any new loan from any scheduled bank. As a result, the borrower faces difficulty in operating his business smoothly which results uncertainty in cash generation and loan repayment. In this sense, loan-rescheduling is a good solution. Rescheduled loan provides fresh financing to the defaulter. So, the borrower can continue his business and get the opportunity to repay his loan.
Loan-rescheduling has problems too. Most of the rescheduled loans become bad in the long term. This can be said differently. When a loan gets default and approximates to classification, it is rescheduled to avoid being classified. So, some borrowers take rescheduling not as an opportunity but as a tool to make delay as being defaulter. By this time, they can manage new loans from other banks as their irregular repayment history is washed out through loan rescheduling.
Banks should consider some special macro elements like political unrest, economic downfall, natural disaster etc. while making rescheduling decision. Micro elements like the nature and status of borrowers businesses, probability of future cash generation etc. should also be evaluated. Most importantly, integrity of the borrower and willingness to repay the loan must be ensured before rescheduling a loan, and if so, rescheduling will add value to both the banks and the borrowers.
Md Mosarraf Hossain
West Shewrapara, Dhaka
mosarraf33@gmail.com
Rationale for loan rescheduling
FE Team | Published: February 20, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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