There has to be a set policy on which loans can receive an interest exemption, and what the financial institutions do about the outstanding non-performing loans.
Wiping Tk6.8bn from the banks’ accounts receivables in the last 3 years, and not being able to recuperate Tk223bn in bad debt, cannot be a way forward for any emerging economy.
That the contribution of bad debt to our total loans taken out has risen 4 points, from 6% to 10%, makes the situation all the worse. It means that the sector has failed to put a leash on people misusing private savings at their whim, provided they have the correct influence.
We are all in for the growth of the business sector, and we would like to see businesses being allowed easy access to credit to facilitate expansion, provided they use it properly. And interest exemptions due to legitimate causes are not a bad thing. However, the fact remains that it is the people’s money that the banks lend.
Default loans and exemptions mean that the sector’s efficiency and the people’s returns from capital decreases, and the banks become conservative in sanctioning more loans. Hence, business growth is hampered.
The downside to this trend is that the people defaulting loans or taking exemptions are politically connected and use the connections for leverage. So, the business sector has to bear the brunt of the misdeeds of a select few people, who in actuality are re-sanctioned loans due to their lobby anyway.
This malpractice cannot be sustained and banks need to be empowered so that they can eradicate this problem. A reasonable, updated policy has to be put in place; more importantly, it has to be implemented properly.
