BB asks banks not to charge interest on loans for April, May

Bangladesh Bank (BB) has asked all the scheduled banks to keep their interest on all kinds of loans into a separate account for two months considering the Covid-19 induced inconvenience.
The banks will have to transfer the interest income for the period from April 01 to May 31 this year to an interest-free block account which will not to be recovered from the borrowers, according to a notification issued by the central bank on Sunday.
"We've taken the measure to facilitate the country's business activities that have been facing difficulties since the spread of coronavirus outbreak," a senior official at the BB told the FE.
The next decision on the block account will depend on the situation, he hinted.
At present, the borrowers will not require paying the interest for the couple of months against their existing loans with any bank, according to the central banker.
Besides, he added, the banks will not be allowed to show the amount of the account as income until further notice.
Senior bankers, however, said the profitability of the banks will be affected by the  end of this calendar year if the decision in this regard is not taken properly.
The profitability of banks has already squeezed following implementation of the 9.0 per cent interest rate on all loans except credit cards, they added.
"The policymakers should consider the issue giving emphasis on the banking sector's development," a senior executive of a leading private commercial bank said.
On the other hand, the BB had already relaxed its policy asking the scheduled banks to suspend adverse classification of any loan until June 30 to facilitate business activities that have been adversely affected by the coronavirus outbreak.
Under the relaxations, the banks have been instructed not to adversely classify any loan until June 30 from January 01, 2020, according to a notification issued by the central bank on March 19.
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