Banks balk at rescheduling non-wilful defaulters' loans

A bailout policy-support committee constituted by the central bank for the affected businesses sits with all commercial banks' chief executives soon to motivate them as the lenders hesitate to reschedule non-wilful defaulters' loans.

Sources said at the last meeting with the committee, some commercial banks had expressed unwillingness to reschedule such loans as they said the lenders were already struggling with massive non-performing loans (NPLs) and a financial crisis.

Some banks also suggested the committee not to recommend changing any rules and regulations of the central bank for the exigencies of helping out non-wilful defaulters as the existing ones are enough, bankers said.

The Bangladesh Bank (BB) formed the 'selection committee for policy support to restructure businesses and financial management' that sat with some 15 international and national private commercial banks' officials in mid-February. Bank officials there expressed their stance on the current financial and NPL crises, said bankers and committee members.

The bailout panel at the last meeting requested each commercial bank to identify non-wilful defaulters whose businesses had been affected for multiple reasons, including Covid-19 pandemic, the Russia-Ukraine war, energy prices, US dollar shortages, and July-August 2024 mass uprising.

The five-member committee will list out non-wilful defaulters who have loans of Tk 500 million or above with various commercial banks.

"We have already held two meetings. At the second meeting, we sat with the chief risk officers (CROs) of 15 international and local private commercial banks. We learned about the current rules and regulations for the loan-restructuring policy and portfolios," Mamun Rashid, a member of the committee and a former banker, told The Financial Express.

He said, "We requested the banks to select the businessmen affected by the five aforementioned reasons. Then we will scrutinise those businesses. We will make the final selection and recommend the rescheduling of their loans."

He said since many banks are in a shambles due to the financial crisis, the previous loan- rescheduling system, and some other reasons, some of them are not willing at this moment to give any more opportunity to the affected businesses. But the committee will sit shortly with the chief executive officers (CEOs) of the banks to help the enterprises that were really affected. The central bank governor will be present there as well.

"We will actually go with the bank-led model. We will not force them beyond the national and international practices. We will scrutinise some international models used in Indonesia, Thailand, Sri Lanka, India and the Philippines. Then we will request the banks to give some respite to the affected businesses," he explains.

Another committee member told The Financial Express at the first meeting with the CROs of 15 commercial banks, some were unwilling to offer another loan-restructuring opportunity to the affected businesses due to their previous bad experiences.

"So, we have decided to involve the Bangladesh Bank governor and the CEOs of the banks to go ahead with our purpose of giving respite to the affected businesses," he added.

Mamun said many businesses that contribute to the industrial sector, for example by generating employment, and were affected due to any of the five reasons should get opportunities to continue their operations with the support of their respective banks.

"So, we are hopeful the banks will come forward to help us select the non-wilful defaulters and give them respite," he added.

He said some of the affected businesses had already applied to the committee for such opportunities. "But we have suggested they go to their respective banks. The banks will provide us with their information. Then we will scrutinise and recommend names for the support," the former banker said.

The businesses that have already been given rescheduling opportunities thrice will not be allowed to get any more, he added.

Asked about the regulatory move, Eastern Bank Managing Director Ali Reza Iftekhar said they had suggested the BB-formed committee not to change the existing rules and regulations to reschedule the loans of non-wilful defaulters as the central bank had already relaxed many of those.

"If the committee recommends us to reschedule the loans under the existing rules and regulations, we will do that," he added.

Requesting anonymity, another senior banker said they were not in a position at this moment to give such facilities to defaulters as they are already facing fund and NPL crises.

The committee will select the industries and entities which have been badly affected by reasons beyond their control before providing policy support for their revival.

The special regulatory move came after a delegation of the country's apex trade body - the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) - placed such a demand during a meeting with Bangladesh Bank Governor Dr Ahsan H Mansur in late January.

Hailing the move, the FBCCI and other businesses also welcomed the central bank as many business units had been hit hard by multiple factors since the pandemic, forcing them to either reduce production or shut operations.

As a matter of fact, the businesses became loan defaulters under the existing regulations.

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