Kazi Zahidul Hasan :
The central bank has restructured Tk 11,644 crore outstanding loans of 10 business group under its new Large Loan Restructuring Policy (LLRP), which is being considered as a threat to the healthy banking in the country.
The business groups are Beximco, Jamuna, Thermax, Sikder, Abdul Monem, Keya, SA, BR Spinning, AnonTex and Ratanpur.
Opposing such move of the central bank, economists on Tuesday said, the large borrowers are fortunate to avail the restructuring facility, but the small borrowers face the litigation in case of their failure to repay the bank loans.
“The central bank’s move will encourage the loan defaulters and discourage the good borrowers. It will also promote a bad culture in the country,” Dr Salehuddin Ahmed, a noted economist of the country, told The New Nation on Tuesday.
Terming it as a ‘pervasive incentive’ for large borrowers, he said, “They are given loan restructuring time despite failure to repay loan in time. They should be forced to respect bank’s terms and conditions. Unfortunately, they have been given incentive in such a way.
Dr Salehuddin Ahmed, a former central bank governor, suggested that Bangladesh Bank (BB) should pursue a policy in which banks could easily realize bad or default loans from big borrowers.
“The core objective of the large loan restructuring policy is to recover the loans. If it misses the goal, the banks will have to take a bigger hit. They will have to set aside a larger part of their earnings and classify such accounts as non-performing or bad loans immediately.
This will impact banks’ profitability and even require higher capital infusion,” he noted.
“Big borrowers having Tk 500 crore or above outstanding loans are allowed to get the facility in accordance with BB policy. This is not a prudent policy because it has created a disparity between large and small business groups,” Dr AB Mirza Azizul Islam, former Finance Adviser to the caretaker government, told The New Nation on Tuesday.
Mirza Aziz observed that BB cleared the loan restructuring proposals of 10 business groups which were habitual defaulters. If they should not change their habit, the objective of the large loan restructuring policy would not work in future.
“If the policy does not work, the country’s commercial banks, particularly public banks will face further trouble,” he added.
“Big corporate groups are allowed to get the scope of the restructuring policy. The country’s financial system will face crisis if the groups default after the restructuring of their large loans,” Dr Khondker Ibrahim Khaled, former BB Deputy Governor, told The New Nation.
He added that the BB should set a condition that the groups under the large loan restructuring policy would not be allowed to avail fresh loan for at least two years.
Commenting on the issue, Zahid Hussain, lead economist of the World Bank’s Dhaka office, said that the objective might be good, but delivery would be a challenge.
“The facility should not offer year after year because it evolves risk factors. Considering this, the BB should take all possible precautions so that the habitual defaulters cannot abuse the facility,” he said.
The central bank on January 27 last approved the LLRP, under which, a big borrowers will get a maximum of 12 years, instead of 8 years at present, to repay their outstanding loans worth above Tk 500 crore.
The central bank has restructured Tk 11,644 crore outstanding loans of 10 business group under its new Large Loan Restructuring Policy (LLRP), which is being considered as a threat to the healthy banking in the country.
The business groups are Beximco, Jamuna, Thermax, Sikder, Abdul Monem, Keya, SA, BR Spinning, AnonTex and Ratanpur.
Opposing such move of the central bank, economists on Tuesday said, the large borrowers are fortunate to avail the restructuring facility, but the small borrowers face the litigation in case of their failure to repay the bank loans.
“The central bank’s move will encourage the loan defaulters and discourage the good borrowers. It will also promote a bad culture in the country,” Dr Salehuddin Ahmed, a noted economist of the country, told The New Nation on Tuesday.
Terming it as a ‘pervasive incentive’ for large borrowers, he said, “They are given loan restructuring time despite failure to repay loan in time. They should be forced to respect bank’s terms and conditions. Unfortunately, they have been given incentive in such a way.
Dr Salehuddin Ahmed, a former central bank governor, suggested that Bangladesh Bank (BB) should pursue a policy in which banks could easily realize bad or default loans from big borrowers.
“The core objective of the large loan restructuring policy is to recover the loans. If it misses the goal, the banks will have to take a bigger hit. They will have to set aside a larger part of their earnings and classify such accounts as non-performing or bad loans immediately.
This will impact banks’ profitability and even require higher capital infusion,” he noted.
“Big borrowers having Tk 500 crore or above outstanding loans are allowed to get the facility in accordance with BB policy. This is not a prudent policy because it has created a disparity between large and small business groups,” Dr AB Mirza Azizul Islam, former Finance Adviser to the caretaker government, told The New Nation on Tuesday.
Mirza Aziz observed that BB cleared the loan restructuring proposals of 10 business groups which were habitual defaulters. If they should not change their habit, the objective of the large loan restructuring policy would not work in future.
“If the policy does not work, the country’s commercial banks, particularly public banks will face further trouble,” he added.
“Big corporate groups are allowed to get the scope of the restructuring policy. The country’s financial system will face crisis if the groups default after the restructuring of their large loans,” Dr Khondker Ibrahim Khaled, former BB Deputy Governor, told The New Nation.
He added that the BB should set a condition that the groups under the large loan restructuring policy would not be allowed to avail fresh loan for at least two years.
Commenting on the issue, Zahid Hussain, lead economist of the World Bank’s Dhaka office, said that the objective might be good, but delivery would be a challenge.
“The facility should not offer year after year because it evolves risk factors. Considering this, the BB should take all possible precautions so that the habitual defaulters cannot abuse the facility,” he said.
The central bank on January 27 last approved the LLRP, under which, a big borrowers will get a maximum of 12 years, instead of 8 years at present, to repay their outstanding loans worth above Tk 500 crore.
