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A section of newspapers had been speculating during the past few weeks about the arrival of yet another bailout for the bank loan defaulters.
Finance Minister AHM Mustafa Kamal Monday last confirmed that an exit plan was on its way.
He told a group of newsmen at the end of his meeting with top government officials and heads of regulatory bodies that the new bailout package would be made effective from May 01 next.
Under the package, a borrower will be given an opportunity to reschedule his classified loan by making a down payment equivalent to 2.0 per cent of his/her outstanding loan amount. The borrower will have the chance to repay the loan within 12 years through quarterly instalment payment. A simple interest rate of 7.0 per cent will be charged on the remaining amount.
However, the finance minister made it clear that only 'honest' defaulters will be offered the 'exit' package.
When newsmen sought to know how banks would distinguish between honest and dishonest defaulters, the finance minister said, the upcoming special audit of banks would help (to get information about it). Such audit work, understandably, would take time.
Claiming that the bailout package is the final outcome of a move initiated by the immediate past finance minister AMA Muhith, he explained the important role played by the bank borrowers in the economy.
"The truth is that you need both banks and borrowers. There is no alternative to bank borrowers because they are the people who create jobs, help eradicate poverty and strengthens the economy", Mr. Kamal said.
His statement was no exaggeration. Bank borrowers, undoubtedly, do play a very important role in the economy. It is also true that not all defaulters have defaulted on loan payments wilfully. A good number of them failed to repay loans under conditions beyond their control.
So, the government, the central bank and the relevant banks have been soft---even, in some cases, more than what rules would permit---towards loan defaulters. The 'dishonest' or wilful defaulters also took advantage of such an approach. But such instances of generosity have not helped the banks recover their soured loans that now constitute more than 11 per cent of their total outstanding loan. Its volume, written-off loans included, is now over Tk 1.3 trillion with the list of loan-defaulters becoming longer over time.
It would be unfair to say that the banks have not been soft enough towards the loan defaulters, wilful or otherwise. Rather banks and the central bank, on occasions, have gone out of the way to make room for the loan defaulters. While doing this they had to digest bitter criticism coming from all directions.
The loan-restructuring facility offered to some selected large loan defaulters in January 2015, particularly, had drawn very strong criticism. A total of 11 borrowers with defaulted loans amounting to about Tk 150 billion got rescheduling facility that came as the 'final' lifeline to them. The conditions attached to that facility were almost identical to those to be tagged with the upcoming facility.
Yet the central bank, allegedly coming under pressure, decided to continue with the facility that, as predicted by many, has failed to produce anything positive for the banks. It has only provided some breathing space to some large delinquent borrowers.
All the relevant parties, however, have been maintaining conspicuous silence over the fate of the loan-restructuring facility. As far as information gathered about it, barring a couple, other relevant borrowers have failed to pay loan instalments in compliance with the central bank guidelines. The banks, according to clause 04 of the loan restructuring guidelines, are supposed to cancel the facility and initiate legal actions under the bankruptcy act.
It was expected that the finance minister while talking about the new bailout package would explain the fate of the loan-restructuring facility that is already in place. Interestingly, the newspaper reporters present at the briefing did also fail to ask this very pertinent question.