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The government reportedly is devising yet another bailout package for the big loan defaulters.
The terms and conditions, according to a number of recent newspaper reports, in the proposed facility will be softer than those included in an identical scheme introduced by the central bank in 2015 following hard lobbying by a section of influential yet delinquent loan defaulters. The facility is known as the 'restructured loans'.
In the proposed package, the amount of down payment on a defaulted loan would be 1.0 per cent but the amount would not be more than Tk 10 million. The loan defaulters will be given 15 years' time to repay the loan with a two-year moratorium period. The interest rate of the loan will be only 7.0 per cent.
Under the loan restructuring facility offered in 2015, loan defaulters got a maximum period of 12 years to repay their long-term loans. In the case of short-term loans, the repayment period was six years. Banks concerned were allowed to fix interest rates on the basis of their respective cost of fund plus one per cent extra. The moratorium period was one year while down payment was fixed at two per cent if the loan amount was less than Tk10 billion and one per cent for loan amounting to Tk 10 billion or more.
The move on the part of the Financial Institutions Division (FID) to offer yet another bailout package does appear strange, given the outcome of the first one.
The objective of the loan-restructuring facility offered in 2015 has been largely defeated since the beneficiaries have failed to fulfil the terms and conditions of the relevant guideline.
However, the central bank, apparently, is unwilling to say anything about the fate of the 2015 loan restructuring scheme. The banks that offered concessions have not taken actions against the borrowers concerned in accordance with the loan-restructuring guidelines.
Instead, the 2015 scheme beneficiaries reportedly would be given yet another opportunity under the proposed scheme. But the 2015 guideline had stipulated that restructuring would be one-time facility to any bank account.
The 2015 bailout for big loan defaulters--- more than Tk 152 billion bad loans belonging to 11 defaulters were structured---- was thought to be the last opportunity granted to regularise their loans. In fact, the scheme was the outcome of frantic efforts on the part of a few big loan defaulters who had exhausted all the opportunities offered by banks earlier.
It seems that these delinquent borrowers are quite high on their never-say-die spirit. Thus, they are on the verge of creating yet another opportunity to stay afloat.
Leading banking experts and economists have strongly criticised the FID move to put in place yet another 'breathing space' for the big loan defaulters. The banking sector is already having serious problem with their non-performing loans (NPLs). The proposed scheme would only encourage the default culture further, adding to the woes of the banks. It would also go against the tough words that are often uttered by the incumbent finance minister against delinquent bank-loan defaulters.