The new loan rescheduling policy by Bangladesh Bank (BB) allows borrowers a longer period of time to repay their loans. It’s nearly five times more than the previous policy while the repayment has been reduced by four times. This means many loan defaulters will be able to take almost 30 years to repay their loans.
Defaulters too will be able to reschedule their non performing loans (NPLs) four times now, which was thrice previously.
They will also only have to pay 4.5% of the overdue amount which was 15% for loan rescheduling.
The Dhaka Tribune asked bankers and economists what they thought of this new policy.
“Central bank's policy will make bank defaulters happy”
Zahid Hussain, former lead economist of the World Bank's Dhaka office
Everything is returning to the shape it was before the Covid-19 hit. Many businessmen are in a good position with their cars, houses, and assets increasing. However, they are not repaying their loans. The central bank's new policy will make them happy.
Many people are running businesses and still not paying back loans. They are forming multiple companies and investing in them, even if the companies in the name of which they are taking loans are not in a good position.
Businessmen demanded that they should not be regarded as defaulters in any way so that they do not lose access to credit, and the central bank has formulated its new policy as per their demand. While making decisions, Bangladesh Bank should think of the entire banking sector without thinking only about the businessmen.
“Bank's default loan management will be better”
Selim R F Hussain, chairman, Association of Bankers, Bangladesh (ABB) and Managing Director and CEO at Brac Bank
The current governor has undertaken various reforms after joining. Bangladesh Bank is now playing a pioneering role among many organizations in the country. All this is possible due to the active role of the present governor.
Earlier, the central bank had more to do with the borrowers. They did the main calculations. Now that responsibility will be in the hands of the bank.
This will increase the bank's ability to manage defaulted loans. Many say that debtors have been given a big discount. But I don't think so. I think now the bank's default loan management will be better.
“Loan Rescheduling policy may create liquidity crisis”
Saleh Uddin Ahmed, Former governor of the Bangladesh Bank
The banking sector is like the nerve of the economy. If this sector is affected, the entire economy will also be affected.
The wholesale concessions offered by the central bank in its new loan rescheduling policy are not desirable. Default loan recovery must be strengthened.
Recent relaxation to bank borrowers in rescheduling loans may create a liquidity crisis in the banks.
As a result of the extensive offers, the loaned money will not come back to the banks. Banks will face a liquidity crisis as a consequence. So, the offers should have been made on a case-by-case basis.
Currently, the overall banking sector is facing various challenges and just a handful of people are in control of its direction. Before bringing any change in banking sector rules and regulations, there should have been some consultation with experts and people. There is no revision of existing rules and even a small group dominates the formulation of policies.
“It is undesirable to impose a weak plan on the banking sector to save businesses”
Ashikur Rahman, senior economist at the Policy Research Institute (PRI) and a Member Secretary of Bangladesh Economists' Forum (BEF)
Considering the current global economy, I think that the benefit of loan repayment tenure and the percentage of NPL down payments given here can be discussed. The first one is good governance and the second one is the current global situation.
The global economy is not in very good shape. Its influence on Bangladesh is also increasing.
Inflation is rising along with the price increase of many products in the international market. Moreover, the situation of new Covid-19 outbreaks is also a matter of concern.
In this situation, the benefit of loan residuals may give some relief to businesses. However, the discount amount and time could have been more thought out. It is not desirable to impose a weak plan on the banking sector to save businesses.
