Bangladesh Bank (BB) has introduced a major interest waiver facility for loan defaulters after many loans that had been regularised under the special rescheduling policy introduced in 2024 fell back into default within 10 to 12 years.
In a circular issued on Monday, the central bank allowed banks to waive both charged and uncharged interest on defaulted loans. It also relaxed the requirement that banks must first recover their cost of funds before granting such waivers.
As of December 2025, uncharged interests against default loans amounting Tk1 lakh crore remained in interest suspense accounts of banks, according to central bank data.
Bangladesh Bank came up with the new mechanism to clean up the balance sheet by removing bad loans permanently, helping defaulters to come out from the default status.
The latest circular mentioned that defaulters who received the special rescheduling facility from 6 August 2024 to 30 June 2026 will be also entitled to interest waiver.
Under the new circular, defaulters are also allowed to go for a one-time settlement by paying only the principal amount which means they will not need to repay any interest.
If banks waive Tk1 lakh crore uncharged interest from interest suspense account, the total default loan rate will decline to 25% from 30.60% recorded in December 2025.
An interest suspense account is a temporary holding account used by banks to record interest that is owed but cannot yet be officially recognised as earned income.
When a borrower stops making payments after stipulated time, the loan is classified as a Non-Performing Loan (NPL). The bank must stop recognising this uncollected interest as profit. Instead of putting it in the profit and loss account, the bank parks the uncollected interest in an interest suspense account.
The country's total distressed assets including default loans, rescheduled loans and written off loans rose to Tk10.87 lakh crore at the end of 2025 which was 60% of total loans in the banking industry.
The new circular relaxes the rules for waiving interest that has been kept in suspense accounts, said a top executive of a private commercial bank.
He said banks agreed that these suspended interests are not considered actual income for banks, as they have not been realised.
Bangladesh Bank data shows that banks rescheduled over Tk2.56 lakh crore in just two years during 2024 and 2025 of which 40% turned into default again.
Source: TBS
