The Financial Institutions Division of the Finance Ministry has decided to request Bangladesh Bank to extend the loan rescheduling opportunities at two per cent down payment to defaulters who filed writ petitioners and are facing cases of the Anti-Corruption Commission.
The decision was taken by the FID after state-owned commercial banks requested it at a meeting on January 9 that the step would help reducing the burden of bad loans, FID joint secretary Shukur Ali told New Age on Wednesday.
Shukur, chief of the monitoring committee on restructuring defaulted loans also said that FID secretary Ashadul Islam would submit the proposal to the BB shortly.
He said that extending the opportunity to the errant borrowers would help restructuring defaulted loans of state-owned banks to the tune of Tk 25,000 crore.
The government made the much-talked-about loan scheduling facility effective since May 2019 and it is due to expire in February, said officials.
Former BB governor Salehuddin Ahmed opposed the move terming it as ‘illogical’.
He said providing the relaxed loan restructuring to facility to errant borrowers who filed writ petitions not be declared defaulters and are facing ACC cases would increase the burden of bad loans.
He advised the FID to encourage the state-owned commercial banks and the errant borrowers to settle issues through alternative dispute resolution system of the Bangladesh International Arbitration Centre.
FID officials said that the policymakers were in favour of providing the special loan restructuring opportunities to the errant borrowers and the loan swindlers for reducing the defaulted loan burden.
They said that already Tk 12,394.43 crore in defaulted loans had been restructured allowing the defaulters to repay the outstanding loans in 10 years after making two per cent down payment with one year’s grace period.
They said that pending appeals by defaulters to reschedule their bad loans to the tune of Tk 12,000 crore were expected to be settled later this month.
The government took the decision to reschedule bad loans that soared to Tk 1,12,425 crore, or 11.69 per cent of Tk 6,92,077.26 crore extended as loans by the banks until September 2019.
The government thinks that the special loan rescheduling policy would help settle the defaulted loans through ‘one time exit’ to allow the defaulters enjoy the interest waiver for period preceding rescheduling.
The bailout scheme for the defaulters seen as a politically motivated move, drew huge criticisms as it is discriminatory to the regular borrowers.
In fact, it would punish the regular borrowers and reward the defaulters, said former BB deputy governor Khondkar Ibrahim Khaled.
Moody’s Investors Service, a leading international credit rating agency, in its report released on November 29 at Singapore projected that the asset quality of the banks in Bangladesh would deteriorate further in the coming days unless loan recovery status and poor governance were improved.
It said that persistent weakness in asset quality – a result of poor corporate governance, as well as weak laws and regulations created the ‘negative outlook for the Bangladesh banking system’.
Data compiled by the FID show that the defaulters filed 10,551 appeals including 4,380 cases to avail the one-time exit opportunity of the special loan restructuring scheme.
They filed 2,880 cases against the Sonali Bank, the highest number for any bank to restructure defaulted loans to the tune of Tk 3134.5 crore.
Janata Bank faces 903 cases to reschedule bad loans to the tune of Tk 11,998.70 crore.
The AnonTex Group alone filed case against Janata Bank to reschedule its bad loan in excess of Tk 5,500 crore.
Basic Bank facing bankruptcy for extending shady loans to fictitious borrowers when Sheikh Abdul Hye Bacchu was its chairman faces 485 cases to reschedule bad loans to the tune of Tk 3005.39 crore.
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