BB extends personal loan tenure to 8 years, eases consumer credit cap

The Bangladesh Bank has extended the maximum repayment
period for personal loans to eight years from five years, while also removing a
key restriction on consumer financing growth, a move aimed at boosting retail
lending and expanding access to credit.
The
central bank issued a circular in this regard today (25 June), addressed to the
managing directors and chief executive officers of all scheduled banks.
Under
the revised policy, banks will now be allowed to grow their consumer financing
portfolios at a rate higher than their overall loan growth. Previously, banks
were not permitted to let consumer finance expand faster than the annual growth
rate of their total loans.
Bankers said the longer repayment period would make personal loans more
affordable by reducing monthly instalments for borrowers.
However,
they also cautioned that extending loan tenures could increase credit risks if
not managed properly.
The
removal of the growth cap is also expected to encourage banks to expand their
consumer finance businesses, allowing them to cater to growing demand for
personal and retail loans.
A
senior bank official told The Business Standard that banks often had to explain
to the central bank when consumer finance growth exceeded overall loan growth.
"Many
banks wanted to expand their consumer financing business but were constrained
by the existing regulation. Removing this restriction is a positive step for
the banking sector," the official said.
Commenting
on the new policy, HM Mostafizur Rahaman, head of Retail Business at Dhaka
Bank, said the move reflects the changing needs of Bangladesh's growing middle
class.
"The
decision is a timely move responding to Bangladesh's expanding middle class and
its growing appetite for consumer finance," he told TBS.
He
noted that the circular not only extended the personal loan tenure to eight
years but also increased the maximum auto loan limit to Tk80 lakh for electric,
hybrid and locally manufactured vehicles, while removing the growth-rate cap on
consumer financing. "Together, these measures free banks to meet genuine
market demand," he said.
According
to Mostafizur, the longer repayment period will lower monthly instalments,
making larger purchases more affordable for consumers.
"For
banks, it unlocks retail portfolio growth. Broader consumer access to credit,
in turn, boosts spending and investment, contributing meaningfully to overall
economic growth," he added.
















