BB relaxes credit rating for new issuance of bank loans

The Bangladesh Bank on Tuesday relaxed the credit rating system so that borrowers, who have suffered economic shocks amid the coronavirus outbreak, can have easy access to bank financing to jumpstart their businesses.

To this end, the central bank on that day changed its internal credit risk rating system, a mandatory rating system for banks when issuing loans to their customers.

Under the latest BB circular, banks were allowed to take into account the audited financial statements of 2019 or 2020 when determining the credit risk rating for the year 2021.

The central bank said the change was made with the aim of keeping the impact of the coronavirus outbreak at levels tolerable for bank customers.

The BB also relaxed the scoring system by lowering the aggregate score requirement by each of the four notches of the system which was prepared on the basis of quantitative and qualitative parameters.

Under the modified ICRR system, if a bank borrower’s score is equal to or greater than 75, it is rated excellent. To qualify for the “excellent mark”, achieving a score equal to or greater than 80 was a must.

To qualify for the “good mark” under the revised ICRR, achieving a score between 65 and 75 would be a must while the requirement range was set between 70 and 80 earlier to qualify. of the same note.

To achieve a “marginal rating”, a score between 55 and 65 would be a requirement under the modified ICRR system. However, to receive the same score, the required score range was set between 60 and 70.

Under the amended ICRR, a rating score of less than 55 was defined as unacceptable while the score was set at 60 before the amendment.

A central bank official said the fundamental strength of many companies had deteriorated in the wake of the coronavirus outbreak, prompting the central bank to relax the rating system.

The central bank circular stated that by calculating the ICRR, regardless of a borrower’s score in the qualitative part, if the score in the quantitative part is less than 45%, the borrower’s ICRR will be unacceptable.

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