Pressure for loan repayment must be intensified, not eased

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With Bangladesh Bank coming to offer what appears to be a big break to defaulters by offering them the option to reschedule graded loans more than three times with very low down payments, it is highly unlikely to bring positive change. Rather, the policy risks exacerbating the delinquent loan situation, considered a major problem in the country’s financial sector. The central bank released the new policy on July 18, which gives defaulting debtors the option to reschedule their loans up to 29 years and dramatically reduces the down payment amount to 2.5% from 10% of the loan amount in Classes. Under the new policy, banks are allowed to reschedule loans after receiving 5% of the delinquent loan amount or 2.5% of the outstanding loans, whichever is lower, while under the guidelines Previously, banks were allowed to reschedule loans after receiving at least 15% of the defaulted loan amount or 10% of the outstanding loan amount. The repayment period for rescheduled loans has also been lengthened considerably. The policy also allows banks to reschedule loans that have already been rescheduled for four or more terms.

The policy appears, as economists criticize, to be a politically influenced and cosmetic measure that could, at best, show a reduced amount as a delinquent loan on paper without changing the real situation. While the government was expected to deliver on its promises to crack down on defaulting lenders and financial institutions for sanctioning loans for political and other ill-motivated reasons, such a measure does not seem practical. Previously, the central bank under general loan rescheduling guidelines in 2012 and 2013 allowed banks to reschedule loans three times. Before the Covid outbreak, the central bank gave defaulters a big break by allowing banks to reschedule defaulted loans for 10 years for just a 2% down payment, amid a record increase in the amount of defaulted loans. default. All these initiatives did not help to contain an increase in delinquent loans – the amount of delinquent loans was Tk 1.13 crore in March. Economists, however, believe that the amount shown as overdue loans is a misleading figure and gives a partial picture of the situation, as regulatory forbearance followed by special rescheduling policies and the cancellation of a large number of unpaid loans performers contributed a reduced amount. in the form of loans in default on paper.

Authorities have repeatedly promised to be tough on defaulters and yet they continue to impose one regulatory forbearance after another. It is high time that the authorities concerned show their will to discipline the banking sector. In doing so, it must ensure that loans are appropriately sanctioned and that defaulting debtors as well as offending banks and officials are brought to justice.

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