Bangladesh Bank (BB) has given big incentives to loan defaulters again. The borrowers cannot be considered defaulters despite nonpayment of loans after expiry of the period. A businessman will get three to six months more over the earlier period for repaying their loans.
In 2012, the central bank had reduced a three-month time frame for treating three types of classified loans - sub-standard, doubtful and bad - to shine out the banking sector in line with the global norms. As per the rules, loans overdue for three, six and nine months are now classified as sub-standard, doubtful and bad respectively.
Acute liquidity crisis currently prevails in the banking sector. Analysts have identified default loans as the main reason. For emerging free of this situation, Bangladesh Bank (BB) has gone for a massive change in policy regarding default loans.
The new policy was made public by the Banking Regulation and Policy Department of Bangladesh Bank on Sunday. According to a circular signed by Banking Regulation and Policy Department General Manager AKM Amzad Hossain, the policy will come into effect from June 30, 2019. Under the new policy, the Banking Regulation and Policy Department of Bangladesh Bank has issued a circular extending the timeframe for classification of loans, to be effective from June 30 this year.
Earlier on April 2, Finance Minister AHM Mustafa Kamal had said that defaulters can repay their loans with 9 percent interest instead of 7 percent. They have to make a 2 percent down payment on the loan amount and repay the rest of the amount in 12 years. The facility will come into effect from May 1.
Prior to that, the Finance Minister reduced corporate tax of banks by 2.5 percent pursued by the Bangladesh Association of Bankers (BAB), an organization of private bank owners. Besides, the central bank reduced Cash Reserve Ratio (CRR) of private banks by 1 percent.
The government brought an amendment to the Bank Company Act with a provision enabling enable four members of a family to be directors of a bank and the directors to hold the post of directors for three consecutive terms or nine years.
The limit relating to government deposits at private banks was also increased from 25 percent to 50 percent. It was assured at the time that the interest rate will be brought down to one digit. But the interest rate is still over 15 percent.
Bangladesh Bank issued a loan restructuring policy for loan defaulters in 2015. Eleven large business groups had their loans of nearly Tk 15,000 crore restructured through taking advantage of the relaxed policy. But except for two, the groups are not paying back the loans despite the availability of such facilities.
It has been said in the central bank circular that if all installments or part of these on fixed term loans are not paid in time, defaulters will get more six months to do so. In cases of default in paying in six months, the loans can be classified as default loans. If installments on current and demand loans are not paid in time, these will come under the default category.
A major portion of default loans is term loans. Borrowers will get six more six months after the expiry of the payment deadline. Due to this new advantage, a large portion of such loans will come into the list of regular loans. Consequently, the volume of default loans will come down.
Reportedly, the volume of default loans in country's banking sector was Tk 22,481 crore in early 2009. The amount stood at Tk 93,911 crore at the end of 2018. Besides, the balance of the written-off loans has stood at Tk 37,866 crore. As a result, the amount of default loans in the banking sector is over Tk 1 lakh thirty thousand crores.
Latest News