AS reported by the New Nation on Wednesday the central bank took a policy aiming at giving support to the defaulted big borrowers who couldn’t repay the loans timely due to unavoidable reasons like political unrest, business fall and other local and international factors. Loan volume amounting to a minimum of Tk 500 crore is the lowest level of such classification. For restructuring a loan below Tk 1,000 crore, a borrower must make down payment of at least 2 percent of the loan. If the amount is more than Tk 1,000 crore, the down payment will be one percent of the loan. If a borrower fails to repay two instalments consecutively, he will loose the facility, and then the matter will be decided in line with the bankruptcy law. Under the new framework, if a borrower has multiple loans with more than one bank, the bank(s) concerned may approach the BB separately or together for its consent for loan restructuring. It is argued that the policy would boost economic activities and ensure repayment of loans. According to the existing policy, a borrower can have his loans rescheduled thrice for a maximum of eight years.
To get the facility, under the previous loan regulating rules, one must make a down payment of 10 percent of the loan for the first time, 15 percent for the second time and 30 percent for the third time. He has to pay interest in line with market rate of 13-14 percent. The need for a new policy to restructure large loans came to the fore after Beximco Group appealed to the central bank (Bangladesh Bank) for rescheduling its loans of Tk 5,269 crore. The conglomerate sought a lengthy duration to repay the loans, along with relaxed conditions and low interest rates.
The central bank on Tuesday approved a revised restructuring policy under which a big borrower would get a maximum of 12 years to repay loans above Tk 500 crore. Usually, big loans are disbursed among the companies which enjoy strong support from the political high-ups and they tend to expose inadequacy to pay back the loan after a while — a political culture indeed.
Though, Bangladesh Bank took the policy on the ground of the ongoing political turmoil, snail phase of economic progress and nadir investment scenario, but the real causes for such high growth of loan default cultures are non-professionalism and lack of appropriate feasibility study and massive corruption in the banks and utter failure of the Central Bank to exercise control over the banking operation. Considering the volatility in banking sector, political impasse in our national life and economic sluggishness, the policy of loan restructuring could apparently be justified, but the 12-year is too much time that lays opportunity for money laundering and evading repayment. Debt restructuring must come with appropriate corporate reforms or else a floodgate of demand for large loan restructuring may open, leading to abuse of the policy and threatening the solvency of the embattling banking system.
We are afraid if large number of companies take the opportunity, and surely they will avail of the chance, then the embattling banking sector may lead towards total bankruptcy. Moreover, the long tenure may create a chance to launder the loan and set a culture of loan defaulting.
