BB introduces special exit policy to help finance companies cut bad loans

Bangladesh Bank (BB) today introduced a special exit policy allowing finance companies to recover and adjust non-performing loans (NPLs) through one-time settlements in an effort to reduce classified loans and improve liquidity in the financial sector.

The policy is aimed at borrowers whose businesses, industries or projects have suffered due to circumstances beyond their control, enabling them to settle outstanding liabilities under a special arrangement, said a BB circular today.

Under the policy, borrowers must repay their entire outstanding principal in a single installment. While finance companies are not allowed to waive the principal amount, they may waive accrued interest after verifying the borrower's genuine need.

The circular said any interest waiver must be examined by the company's internal audit department and approved based on the opinion of the Head of Internal Control and Compliance (HICC). In unavoidable cases, conditions relating to the recovery of the cost of funds may also be relaxed.

The facility will apply to loans classified as "Bad/Loss" as of June 30, 2026, including loans that were rescheduled between August 6, 2024, and June 30, 2026.

However, loans involving fund diversion, forgery, fraud or other irregularities will not be eligible for the special exit facility, the circular added.

Bangladesh Bank also instructed finance companies to give priority to settling short-term agricultural loans and loans extended to the Cottage, Micro, Small and Medium Enterprise (CMSME) sector.

The central bank asked finance companies to inform eligible borrowers about the facility through letters and other appropriate communication channels.

Issued under Section 41 of the Finance Companies Act, 2023, the special policy comes into immediate effect and will remain valid until December 31, 2026.