BB eases loan repayment policy for defaulters

 
Bangladesh Bank (BB) has made it further easier for loan defaulters to skip the defaulter status. According to sources from Bangladesh Bank, it has been done keeping in view the adverse economic effect of Covid 19 pandemic, the ongoing war between Russia and Ukraine and the recent floods in some parts of Bangladesh.

Bangladesh Bank says that no companies from major industries will be deemed to be defaulters if they manage to repay at least half of their installments.For example, a company will avoid falling into the category of defaulters by repaying at least 50 percent of the loans payable for the April-June period, according to a notice issued by the central bank on Wednesday.

For small and medium enterprises (SMEs), the level will be as low as 25 percent of their installments.

However, this benefit is only available to those entrepreneurs who have repaid their loans regularly. That means that they must not have defaulted on their installments until April of this year to take advantage of the incentive.

Bangladesh Bank has introduced several loan incentives and policy benefits to help the economy recover from the impact of the pandemic.

A notable policy was not to penalize companies for being unable to make their loan payments. Even last year, businesses were able to avoid defaulting on their loans if they were to deposit at least 15 percent of it.

But leaders from the FBCCI, the apex business association in the country, recently met with Bangladesh Bank Governor Fazle Kabir to demand an extension for the repayment for incentivized loans, waivers for failing to repay last year's loan installments and an extension of default forgiveness until this December.

Following the meeting, the central bank issued a statement saying that it would make a 'reasonable' decision on the issue after taking the opinions of bankers into consideration.It then announced the easing of the loan burden until February 2023 in its notice on Wednesday.

"The long-term negative effects of COVID-19 are persisting. There has been a recent rise in infections, and floods have caused extensive damage in the north and northeast of the country," the central bank said in a statement.

"In addition, Bangladesh Bank has noticed that borrowers are having difficulty repaying the full amount of their loan installments due to the recent war in the international arena, which has led to an increase in the price and transportation costs of various materials, including raw materials, in the international market" Bangladesh Bank stated in its latest circular.

The central bank said it eased the burden of installments to keep up economic momentum and normalize the flow of credit to the private sector.

Former adviser to caretaker government Dr. Wahid Uddin Mahmud said, "The authorities concerned should work hard to constitute good governance and accountability in the banking sector. At the same time it is essential to keep banks away from political influence."

President of Bangladesh Economics Association Professor Dr. Abul Barkat said, "The central bank and other regulatory institutions should carry out firm and uncompromising drive to recover defaulted loans to sustain the country's banking sector."

Professor Anu Muhammad of Jahangirnagar University said, "Bangladesh's banking sector has gone into the clutches of financial perpetrators. Some of them are so powerful that the regulators cannot take any action against them." Dr. Zahid Hussain, former lead economist of World Bank, Dhaka Office said, "The regulatory authorities should not compromise with any bank or financial institution in case of graft and anomalies."