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Experts fear willful defaulters will increase

  • Published at 09:37 pm May 18th, 2019
Banking
Photo: BIGSTOCK

The central bank through a circular on Thursday offered the waivers to the loan defaulters

Experts have come down heavily on the latest Bangladesh Bank policy allowing defaulters to reschedule loans by paying 2.0% down-payment for a maximum period of 10 years. 

They think that offering such a benefit will increase the number of willful defaulter and discourage good borrowers from repaying loans. 

The central bank through a circular on Thursday offered the waivers to the loan defaulters. 

Talking to Dhaka Tribune, World Bank Lead Economist for Dhaka office Dr Zahid Hossain said that all defaulters would take this opportunity. 

He admitted that this would reduce the amount of defaulted loan of the banking sector but it said nothing as to what would be the arrangements for those who would be defaulters again. 

He said that the law against the defaulters needed to be tightened and its implementation was necessary. 

Providing rebate to the good borrowers is a positive step but positive result of the initiatives will depend on its proper implementation, he noted. 

Former director general of Bangladesh Institute of Bank Management Toufiq Ahmed Chowdhury said that the new waivers for defaulters would cast a shadow over the whole banking sector.

“Good borrowers will be discouraged to repay their loans. The latest directives of the central bank will jeopardize the banking sector, while loan defaulters will gain undue advantage,” Toufiq told Dhaka Tribune.

Bangladesh Bank former deputy governor Khondokar Ibrahim Khaled said that this new facility would push the entire banking sector to a grave danger as through this, he feared, the defaulted loan would not be reduced.

Internationally Bangladeshi banks would go down and not be evaluated in international standards, he said. 

He mentioned that till December last year, the defaulted loans of the banking sector was at Tk80,000crore, which would be converted into good loan with just 2% down payment. 

0n the other hand, Tk80,000crore in the form of provision against defaulted loans will go to the bank’s directors as a dividend, added the former deputy governor of the central bank. 

"There is a kind of alarm among us. Good borrowers may try to take advantage of this,” said Association of Bankers, Bangladesh (ABB) Chairman and Dhaka Bank Managing Director Syed Mahbubur Rahman.

He said: “We are willing to provide this facility for real businessmen who are in real trouble. We have no objection in this. But the benefit should not for willful defaulters.”

"The circular has just been issued; wait a few days; its effects will be understood," Syed Mahbubur Rahman added.

As per the central bank circular, the borrowers will also be able to avail 'One Time Exit' facility by clearing all dues by 360 days after approving such facility by the banks concerned.

To get the special facilities the interested borrowers will have to apply to the banks concerned within 90 days from the date of issuing the notification for availing such, it added.

The interest rate on rescheduled loans will be 3.0% higher than the bank's cost of fund. But the interest rate will have to be kept within 9.0%. The interest will be imposed on the rescheduled loans from January 01, 2019.