The government is likely to give opportunity of restructuring any large defaulted loan by making down payment of up to only Tk 1 crore.
Officials said the new term was included in the draft bailout package proposed by the Financial Institutions Division after consulting with Bangladesh Bank and a high-powered committee appointed in June, 2018.
According to the draft bailout package, the amount of down payment on a defaulted loan would be one per cent of the defaulted loan but it would not exceed Tk 1 crore.
For example, if any borrower has a defaulted loan worth Tk 50 crore, he or she could restructure the loan with down payment of only Tk 50 lakh (one per cent of the loan) and if the borrower has a defaulted loan worth Tk 600 crore, he or she could regularise the loan with a down payment of Tk 1 crore.
As per the draft, loan defaulters would be given 15 years to repay the loan with two years of moratorium period and they would be charged with seven per cent interest rate.
Experts said the proposed bailout package would benefit loan defaulters especially the wilful ones.
According to the Bangladesh Bank’s current policy for restructuring bad loans issued in 2015, loan defaulters get maximum 12 years to repay long-term loans and six years for short-term loans by paying interest rate at discounted rate but not less than the cost of fund plus 1 per cent.
The present moratorium period is maximum twelve months while the down payment is two per cent of the outstanding amount if such amount is less than Tk 1,000 crore and 1 per cent if the amount is Tk 1,000 crore or above.
Borrowers who earlier restructured bad loans but failed to meet conditions have also been included in the draft bailout package, but they could reschedule bad loans they accumulated only in last 15 years.
FID which prepared the bailout package at a February 27 meeting held at the secretariat is now waiting for approval from finance minister AHM Mustafa Kamal.
Asked about update on the bailout package, FID secretary Ashadul Islam told New Age on Tuesday that he could not say anything about it at the moment.
FID prepared the bailout package by the recommendations put forward by a committee appointed in June 20, 2018 with Agrani Bank chairman Zaid Bakth heading it.
Zaid Bakth who was present at the February 27 meeting refused to discuss the terms and conditions since they are yet to be approved.
He, however, told New Age on Tuesday that the main aim of the bailout package was to give ‘breathing space’ to banks especially the state-owned ones.
Bad loans in the country’s banking system grew by 26.39 per cent to Tk 93,911.4 crore in 2018 from Tk 74,303 crore at the end of December 2017.
State-owned commercial banks — Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Development Bank and BASIC Bank — held bad loans worth Tk 48,695.87 crore in 2018. The figure was Tk 37,326 crore in 2017.
Bad loans in the state-owned commercial banks constituted 51.85 per cent of the country’s total amount of such loans that forced them to keep provision and compromise profits.
Former interim government adviser Mirza Azizul Islam said the government was rewarding loan defaulters.
He also said the move would reduce the amount of bad loans but ‘artificially’.
In the long run, banks would face further problems as they could not realise the bad loans, he noted.
Since becoming finance minister in January, Mustafa Kamal identified bad loans as the major problem for the country’s banking sector.
On Monday, Mustafa Kamal said they would consider calculating interest rate of loans on simple interest basis as the number of loan defaulters was increasing in the country due to the practice of calculating loans using compound rate by bank managements.
It is reported that BB took a move to bring about major changes in the definition of default loan to address the growing bad loans following an instruction of the government high ups.
Former Bangladesh Bank deputy governor Ibrahim Khaled said it was already proven that bad loan culture could not be stopped by relaxing policy.
He said that the present government allowed the erring borrowers to restructure large loans in 2015, but the step could not help in bad loan recovery.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking