Kazi Zahidul Hasan :
The country’s commercial banks have reportedly been rescheduled a massive amount of loan from December 2013 to June this year taking advantage of the central bank’s relaxed loan rescheduling policy, sources said.
Bangladesh Bank (BB) in December 2013 instructed banks to relax loan rescheduling rules for businesses affected by political instability.
The relaxation was meant to aid the borrowers from defaulting.
“Banks took full advantage of this and altogether rescheduled loans amounting to Tk 30,000 crore during the period,” a senior Bangladesh Bank (BB) official told the New Nation on Saturday preferring anonymity.
He added: Nearly 700 business firms, including big corporate groups, availed the special facility from the banks.
“The relaxed BB policy was applicable until June 2014, but the banks are still continuing the same practice to take undue advantage of it,” he said.
When asked, the BB official said that the central bank at a recent meeting with the bankers instructed them to stop the practice immediately. “They have been asked to settle all cases of loan rescheduling by September this year, otherwise, they have to face BB’s action,” he warned. The BB official further said, a clam in the country’s political arena is prevailing now. So, the banks would not be allowed such a facility further.
Economists and former bankers, however, expressed concern over the unabated loan restructuring by the commercial banks saying that it would further distort their financial position as well as create indiscipline in the banking sector.
“It is not a prudent policy. It sends the wrong signal that not repaying on time is acceptable,” Dr Zahid Hussain, Lead Economist, the World Bank’s Dhaka office told The New Nation on Saturday. He also said, the practice creates a moral hazard by implicitly encouraging delayed repayment and even default. This increases the cost of capital for lenders which they are compelled to recover from the honest borrowers.
“The latter are thus discouraged to borrow and tend to rely more on self financing. This limits the scale of their investments. Thus both the banking business and the businesses that underpin banking business are adversely affected,” he noted.
Dr Zahid further said that it could potentially by attracting bad borrowers.
When asked, he said, “It may some very limited short-term gains at the expense of deep and pervasive long-term pains.”
Commenting on the issue, Dr Salehuddin Ahmed, former BB governor, said, “The conditions in the loan rescheduling policies allowed borrowers to get pervasive incentive although they have defaulted big amount of loans.”
In my mind, he said, the central bank decided to offer the loan restructuring facility to troubled large borrowers. But there are reports that borrowers having dubious track record have granted the facility that, in fact, a discrimination against other borrowers who faithfully and regularly service their debts.
“This should not be. Only the genuine ones should get it. If such a practice continues, it may create indiscipline in the banking sector,” he added.
Dr Salehuddin Ahmed, however, asked the authorities of central bank to refrain from such policy and suggested to apply a stringent loan restructuring policy considering stability in the banking sector.
