NEWS report in a national daily on Wednesday said Janata Bank has approved a revised proposal to restructure Tk 1,849.10 crore loans of BEXIMCO group with a total loss of Tk 1,122 crore; which is much higher than earlier estimated loss of Tk 838 crore as the restructuring break up suggest. The loss is calculated in terms lower profit at 9.82 per cent interest instead of 15 percent to repay the loans between 6 and 12 years. The bank has submitted the proposal early this month to Bangladesh Bank for approval. The new rates include 8.82 percent cost of capital plus one percent service charge.
As it appears the borrower being a big corporate house is dictating the term of repayment apparently under political patronization raising question as to whether such unilateral concession can be granted. It sounds discriminatory to others. But the core issue is also the recovery of huge money put in loans to BEXIMCO, which is running manufacturing, exports and various utility services creating jobs and income to thousands of people. So helping BEXIMCO may be justified like helping a sick public sector enterprise with reasonably lower repayment terms. But by doing so, the state owned Janata Bank is also sheltering high profile corruptions, money laundering and inefficiency under the mantle of BEXIMCO’s corporate management. It is unacceptable but inseparable as well.
The restructuring also includes a loan portfolio of Tk 666 crore of Thermax Group, an affiliate of BEXIMCO with similar conditions. Under the agreed loan restructuring total BEXIMCO liability to Janata Bank will be Tk 2,587.81 crore with funded loans of Tk 1,723.80 crore and non-funded bank guarantee of Tk 864 crore as end of September this year. The group will have to pay Tk 184.91 crore as down payment to be eligible for overall loan restructuring.
What is noticeable is that Janata Bank initially calculated the loan at 16 percent interest, which is a very high lending rate for business to earn income to repay from profit. It explains partly why businesses and specially big investment fall sick and loans become stuck up. Once sickness starts rolling, a business can’t turn healthy overnight. It appears that Janata Bank has agreed to reduce interest rate to 9.82 percent to facilitate the rescheduling of loans with a significantly lower cost of capital. Then the question is why it demanded higher lending rate such as 16 percent in this case.
What may be advisable is that banks must reduce lending to single digit to businesses and long- term investment so that repayment may be made in time. If Janata Bank can now substantially lower rate, why not always to make borrowing by business easier to help the private sector growth. It is high time banks must reduce lending rates to avoid spilling up bad loans.
