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Loan rescheduling: TIB urges Bangladesh Bank not to engage in self-defeating move

  • Published at 09:23 pm September 13th, 2019
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The Bangladesh Bank building at Motijheel Mehedi Hasan/ Dhaka Tribune

It also urges the government to constitute an independent commission to recommend a new national banking sector strategy

Transparency International Bangladesh (TIB) has expressed deep concern and disappointment over yet another reported compromise and non-compliance by the Bangladesh Bank (BB) with its own policy, by allowing another round of rescheduling for a leading repeat loan defaulter.

In a statement issued on Friday, the anti-corruption watchdog said the central bank set yet another bad precedence with terrible consequences for the ailing financial sector. 

TIB called upon the BB to refrain from this self-defeating move and appealed to the government to consider TIB’s longstanding recommendation to form an independent commission to recommend a new national banking sector strategy. 

In the statement, TIB Executive Director Iftekharuzzaman expressed deep disappointment and grave concern regarding the reported move and called upon BB not to take such a self-defeating decision.

Dr Zaman said: “We also call upon the government to acknowledge the deep crisis in the banking sector and by shunning the denial syndrome, form an independent banking sector reform commission so as to develop a national strategy to address the deepening crisis. 

Loan defaulters, irrespective of identity or status, cannot be allowed to dictate terms to BB and cause non-compliance of its own policy decision to get illegitimate extension of endless privileges of rescheduling, nor can BB allow itself to be held hostage and continue to accumulate ever greater risks to the sector. We call upon the Central Bank to have the courage to play its entrusted role in the national interest and refrain from any such move.”

The TIB statement said that the reported move by the central bank sets yet another extremely bad precedence and undermines the credibility of the bank. According to TIB, itt will open the floodgates for further similar compromises and only deepen the ongoing crisis in the financial sector in general, and the banking sector in particular. 

Iftekharuzzaman said: “The reported rescheduling of the loan is particularly ominous for the economy at a time when the state is reportedly starving for cash and the Government is resorting to a legal provision to go for an unprecedented type of borrowing from public and autonomous institutions that may lead to a panicky deepening of public mistrust and paralyze the economy. If conscious of public interest, the BB cannot afford to continue to protect and grant impunity to loan defaulters, nor can it further institutionalize the default culture and continue to shift the burden of this menace on the people.”

He continued: “We reiterate our call upon the government to form a fully independent committee of experts consisting of reputed, independent and credible specialists, to analyze the deepening crisis in the sector and recommend short, medium, and long term strategy to address it, failing which the situation may become absolutely unmanageable causing the bubble of high growth to burst."

According to a media report published on Friday (13 September), the Bangladesh Bank is going to grant the above-mentioned rescheduling facility to Beximco Ltd which was in 2015, granted an already unprecedented concession of similar rescheduling on condition that no further rescheduling would be applicable to this and other similar beneficiaries. 

The Central Bank, according to the media report, is reneging on its own position, apparently under pressure, which is the last thing expected from a Central Bank of any degree of credibility, the statement said.