Taking note of ongoing global and domestic macroeconomic challenges, the Bangladesh Bank (BB) has extended its relaxed internal credit risk rating (ICRR) system for another year.
The move makes it easier for borrowers with weaker credit scores to access formal loans.
Under the new extension issued Wednesday, clients with ICRR scores below 50 will not be classified as ineligible for bank loans.
This leniency -- first introduced in 2021 to counteract Covid fallout on the economy -- will now continue through 2024 to support continued business activity amid changing circumstances.
Sources at the BB said that the extended ICRR system was originally due to be replaced this year with a new system where borrowers scoring below 60 would be considered unsuitable for loans.
The ICRR is a mandatory rating system used by banks when extending credit to customers.
It assigns scores based on quantitative and qualitative factors, categorised into four levels: excellent, good, marginal and unacceptable.
These ratings are crucial for banks in determining loan eligibility.
Under the extended ICRR, commercial lenders categorise clients based on their last audited financial reports: 75 and above for excellent, 65 for good, 50 for marginal and below 50 for unacceptable.
BB spokesperson Md Mezbaul Haque said that banks will consider various factors, including corporate culture, cash flow and sales volume when assigning ICRR ratings.
"But the extended ICRR system will not be effective after 2024," he said.
Starting in 2025, the new ICRR system will categorise borrowers as follows: 80+ for excellent, 70+ for good, 60+ for marginal and below 60 for unacceptable.
© 2024 - All Rights with The Financial Express
