Fresh guideline soon on loan rescheduling

FE Report | Published: May 09, 2019 10:33:33 | Updated: May 21, 2019 14:09:07

- Picture used for illustrative purpose

Finance Minister A H M Mustafa Kamal said the central bank will issue a revised guideline soon on default loan rescheduling.

"What we've pledged so far (on rescheduling of default loans) will be stated in the guideline," he told newsmen after a meeting of the Cabinet Committee on Public Procurement on Wednesday.

Mr Kamal, after assuming the office as the finance minister, on different occasions pledged to provide facilities to the businesses, who have become loan defaulters 'unwillingly'.

Subsequently, the Bangladesh Bank (BB) issued a policy in the first week of February, empowering banks to write off loans up to Tk 0.20 million instead of the previous ceiling of Tk 50,000 without filing cases for recovery.

The policy also allowed the banks to write off such loans after three consecutive years instead of the previous five years.

As part of the initiatives to provide facilities to the loan defaulters, the BB issued a circular on April 22, revising the term-loan classification rules.

Under the new provision, if any instalment(s) or part of instalment(s) of a fixed-term loan is not repaid within the fixed expiry date, the amount of unpaid instalment(s) will be treated as past due/overdue after six months of the expiry date.

According to a circular of September 23, 2012, the amount of unpaid instalment(s) was treated as past due/overdue from the very first day after the expiry date.

Some days back, the minister also pledged to provide loan restructuring facility for a twelve-year period by paying 2.0 per cent of the total default loan.

Of his other pledges, the formation of an asset management company to recover default loans from errant borrowers has remained unfulfilled until now.

Officials said a committee, led by an economist, was formed in last June to prepare a guideline on default loan restructuring. The committee submitted a report to Mr Kamal early this year.

The finance minister later had several meetings in this regard with the stakeholders concerned, and finalised the guideline.

Meantime, the move to facilitate the loan defaulters has received strong criticism from various quarters.

Many said if the defaulters are given incentives in different forms, the good borrowers will not show any interest in repaying loans on time.

Khondokar Ibrahim Khaled, former deputy governor of the central bank, earlier told the FE that the move to provide a twelve-year loan restructuring facility will be an 'absolute disaster'.

Salehuddin Ahmed, former governor of the BB, told the FE on revised policy for loan write-off that such a revision will affect 'credit culture' in the country.

Until December last the volume of non-performing loans (NPLs) stood at Tk 939.11 billion. Despite close monitoring by the BB the amount of classified loans in the country's banking system jumped by over 26 per cent or Tk 196.08 billion in a year.

However, the amount excludes the loans that were rescheduled and written-off.


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