Showing less defaulted loans will not bring any benefit, experts say
The real picture of the country's banking sector suddenly began to unfold after the cancellation of the special Covid-19 facilities given to the borrowers for loan repayment.
According to a Dhaka Tribune report published on August 23, the traders demanded a new increase in the time required to repay the loan, considering the overall situation. But the sector experts suggested thinking about the overall instalment benefits.
Finally, in a new circular issued by Bangladesh Bank (BB) on Friday, the loan repayment time has been increased. At the same time, the percentage of instalments has also been increased.
As per the BB decision, borrowers will be able to avoid default zones by repaying 25% of their loan instalments until December 31, 2021.
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Before the end of June 30, this instalment payment benefits were 20%. In other words, defaulters have to pay only 5% more than before.
The previous notice also said that borrowers would have to give a portion of their loan instalments by August this year.
Former governor of the Bangladesh Bank Farashuddin Ahmed told Dhaka Tribune: “Just a few days ago, we saw the amount of defaulted loans increase by around Tk4,000 crore after the closure of special Covid-19 loan repayment facility. The real picture of the banking sector started to unfold.”
“In this situation, the time has been extended again without making defaulters. However, this time the instalment percentage has been increased. In fact, considering the overall situation, it seems to me that it is right to give this benefit,” he added.
However, hiding the amount of defaulted loans in the banking sector is not doing any good. This is also hiding the real picture. “Because according to the law, you cannot right-off these loans,” he added.
In addition, default loans in the banking sector also started to go up in the first quarter of this year as the central bank withdrew the moratorium facility.
According to the report, the total non-performing loans increased to Tk98,164.31 crore as of June 30 this year — 8.61% of the sector’s total outstanding loans.
The amount was up Tk3,899 crore from Tk94,265 crore in March, when bad loans constituted 8.48% of the total outstanding loans.
In June last year, default loans stood at Tk96,116 crore and in December last year, NPLs stood at Tk88,734.06 crore.
It has been informed that, as the second wave of Covid hit this year, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) wrote a letter to the central bank governor recently, demanding an extension of the deadline to December this year.
The Chittagong chamber also sent a letter to the governor voicing the same demand.