The central bank offered a special facility to loan defaulters on Thursday, allowing them to reschedule loans by paying 2.0 per cent down payment for a maximum period of 10 years.
Economist and bankers, however, criticised the decision, saying that offering such a benefit to defaulters will discourage good borrowers from repaying loans and will create an increased number of wilful defaulter.
Besides, the borrowers will also be able to avail 'One Time Exit' facility by clearing all dues by 360 days after approving such facility by the banks concerned, according to a notification,
To get the special facilities the interested borrowers will have to apply to the banks concerned within 90 days from the date of issuing the notification for availing such, it added.
The interest rate on rescheduled loans will be 3.0 per cent higher than the bank's cost of fund. But the interest rate will have to be kept within 9.0 per cent.
The interest will be imposed on the rescheduled loans from January 01, 2019.
After rescheduling, if any borrower fails to repay six monthly instalments out of nine or two quarterly instalments out of three of their loans, such facility will be cancelled.
All scheduled banks are eligible to take necessary measures after receiving applications for both the facilities on the basis of balance, calculated on December 31, 2018.
"Such facilities will help reduce the amount of non-performing loans (NPLs) in the country's banking system," S K Sur Chowdhury, Banking Reforms Advisor of the Bangladesh Bank (BB), told the FE while explaining the objective of the notification.
Mr Chowdhury, also a former deputy governor of the BB, further said it will also help strengthen recovery of loans, particularly the bad, close to being written off ones.
The BB's latest move came against the backdrop of a rising trend in the overall classified loans in the banking sector in 2018.
The volume of classified loans jumped by over 26 per cent or Tk 196.08 billion to Tk 939.11 billion as of December 31, 2018, from Tk 743.03 billion on the same day in 2017.
The share of NPLs in the total outstanding loans came down to 10.30 per cent as of December 31, 2018 from 11.45 per cent three months back. It was 9.31 per cent on December 31, 2017.
The classified loans cover substandard, doubtful and bad/loss portions of total outstanding credit, which stood at Tk 9,114.30 billion on December 31 last. The amount was Tk 7,981.96 billion a year ago.
Talking to the FE, another BB official said the borrowers will be eligible to receive fresh credits after rescheduling the bad loans.
Meanwhile, Khondkar Ibrahim Khaled, former deputy governor of the BB, told the FE over phone that the latest rescheduling facility will put the default loans under cover, which will one day swallow the entire banking sector like a cancer.
He said with the latest facility offered to the defaulters none will monitor the loans, but those will remain as classified loans.
"Actually the facility has been provided in the interest of bank owners. If those are not shown as default loans, the money kept with the central bank for provisioning will be added as profit of the banks. So, the bank owners will get millions of taka as profit."
The depositors have been made victims by this new system of loan rescheduling, as their deposits may become risky.
Mr Khaled noted that today the country's banking sector is jeopardised due to poor state of the Basic Bank Limited and the Padma Bank Limited.
"Within a year or two some more banks will join the list," he said.
However, Abdus Salam Murshedy, MP, Managing Director of the Envoy Group, told the FE that the decision to offer loan rescheduling facility has been taken considering the real scenario of present banking system.
If the volume of classified loans remains high, it will create a bad impression about Bangladesh's banking sector abroad, he noted.
However, there should be a check and balance. A defaulter should not be given higher facilities than a good borrower, Mr Murshedy maintained .
"It may encourage good borrowers to become wilful defaulters," he added.
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