Dhaka, July 1 -- Bangladesh Bank has unveiled a sweeping incentive to recover mounting defaulted loans, allowing eligible borrowers to repay only the outstanding principal while receiving a full waiver of accrued interest.

Under the new policy, defaulting borrowers who settle their entire principal amount in a single payment by Dec 31 will no longer have to pay either charged or uncharged interest.

The central bank issued a circular on Monday, instructing the chief executives of all banks to implement the scheme.

Bangladesh Bank data show total defaulted loans climbed to Tk 5.89 trillion at the end of the March quarter, up by more than Tk 310 billion in just three months from Tk 5.57 trillion at the end of December.

The central bank h...