The persistent increase in bad loans has crippled Bangladesh’s banking sector, mostly affecting the state-owned banks.

However, loan defaults in the small and medium enterprise (SME) sector have been low, BB data showed. But, the amount of defaulted loans could rise this year as floods have affected the low-lying regions of the country, experts said. The central bank issued a circular on August 24, relaxing loan rescheduling rules and suspending loan recovery for six months from farmers and SMEs in the flood-hit areas. According to the circular, banks will relax conditions for down payments in case of rescheduling farm loans, SME and cottage loans and micro credit. Debtors will get six months to pay instalments after rescheduling their loans.