BB extends personal loan tenure to 8 years, relaxes consumer finance growth cap
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 grow faster than the annual growth rate of their total loans.
The Bangladesh Bank has extended the maximum repayment period for personal loans to eight years from five years and removed a key restriction on the growth of consumer financing, in a move aimed at supporting retail lending and expanding access to credit.
The central bank issued a circular today (25 June) and sent it 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 grow faster than the annual growth rate of their total loans.
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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, H M Mostafizur Rahaman, SEVP and 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.
