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It was not that difficult for all concerned to understand the ploy of a section of 'hardened' and habitual bank loan defaulters when they had approached the central bank seeking relief under so-called restructured loan scheme.
The central bank was also not that naïve to miss the real intention of the relevant borrowers. Yet it had to issue a guideline for a one-time facility to restructure a few large loans, amounting to Tk 5.0 billion or more each. However, prior to granting the facility, the central bankers passed a part of the responsibility on to the relevant banks asking them to get certificates from 'A' category audit firms about the financial ability and cash flow of the borrowers concerned and cases approved by their boards.
A total of 11 big borrowers in 2015 were granted the 'restructured loan' facility. Under a central bank guideline, the recipients, having an aggregate loan portfolio of over Tk 150 billion, got a number of concessions, including lower rate of interest and extension of repayment periods.
But one did not have to wait for an indefinite period to see the inevitable. As the time arrived in the early part of the current calendar year for payment of first instalment of the restructured loans, at least three large borrowers, in clear violation of the guideline, approached the central bank for rescheduling their loans. It is clearly written in the guideline that there would be no rescheduling of loans under this one-time special facility.
It was no secret that a large corporate house in its last ditch effort had attempted to take refuge under the restructured loan facility as it had no option left to regularise its large loans. The strong link that one of its key sponsors maintains with the ruling party helped the business house manage the facility despite opposition from different quarters, including experts.
The business house had sought the facility citing the 2013-14 political unrest centring around the general election as a major cause behind its losses. Some other big businesses also followed suit as far as restructured loan facility was concerned.
The central bank board this week reviewed the prayers submitted by some recipients of restructured facility for rescheduling their loans and rejected the prayers. In fact, the board should not have allowed the facility in the first place. Unfortunately, the central bank could not take a firm stance as an independent regulator when it was required most.
The central bank's lax attitude, deliberate or otherwise, and lack of due diligence in the selection of borrowers by individual banks have helped accumulation of a huge burden of classified loans on the country's banks. The LR Global in a recent research has estimated the aggregate size of the banks' distressed assets at 17 per cent of their total outstanding loans.
The banking industry with its large load of classified loans, scams after scams and other irregularities is considered a misfit in an otherwise vibrant economy. It is high time the industry were put back on the right track. But that is not possible without an earnest and honest desire on the part of all stakeholders, including the government and sponsors of private sector banks.