In further relaxing its policy for the rescheduling of default loans, Bangladesh Bank is setting a terrible precedent.
According to latest data, default loans in the banking sector surged by 19.3% year-on-year in the first quarter of 2022, short of just Tk2,847 crore from the highest recorded amount of defaulted loans in the country.
In the latest amendment, defaulters who took term loans would be allowed to repay funds over a period of six to eight years along with a grace period of six months to one year. Defaulters will also be enjoying relaxed rules when it comes to the down payments required from them.
While such a policy has, on paper, been issued to keep the financial sector stable from the adverse impact of the Covid pandemic and world events, it is bound to bite us back in the long run -- not unlike how efforts to whiten black money misfired. This latest step by the Bangladesh Bank will more likely see charlatans getting into the banking sector with the objective of taking out big loans and defaulting on them.
While this might result in the injection of cash into the economy in the short term, in the long term, this is bound to result in paper companies and the siphoning of money into foreign exchange accounts.
Our central bank has been in this position far too many times to not have learned anything.
The administration needs to clamp down on repeat loan defaulters instead of kowtowing to them. Bangladesh is on the verge of graduating from an LDC status, and this is a status quo that is reflected throughout the populace. We cannot allow the unscrupulous few to drag down the whole nation with them.
