Written by The Banking Post
A total of 1,253 applications have been submitted to avail the special facility offered by state-owned banks for loan rescheduling. Of these, around 300 applications have been shortlisted initially. Final decisions on these applications will be sent to the banks within this August.
Meanwhile, about 2,500 applications for interest waivers have been received by various banks and financial institutions. These will be settled by the respective banks under their own policies, according to relevant sources.
This special rescheduling facility has been provided for businesses and entrepreneurs in major industries such as ready-made garments, consumer goods imports, leather, and other large sectors that were affected by the Covid-19 pandemic, political instability, and natural disasters.
Sources said that Bangladesh Bank has decided to allow the country’s largest corporate defaulters to reschedule loans of about 300 institutions by making just a 1 percent one-time payment. Under this facility, institutions can reschedule loans with a 1 percent down payment, enjoy up to three years of grace period, and repay over a maximum of 15 years. Only loans of Tk 50 crore or more are eligible for rescheduling. However, willful defaulters will not be allowed to apply for this benefit. The screening committee is reviewing this matter carefully.
Bankers have expressed concerns that such loan rescheduling opportunities may negatively impact the banking sector, potentially fueling an increase in defaulted loans rather than reducing them. While commercial banks will have the option to reschedule under this facility, many warn that it may create challenges for cash flow management.
On the other hand, business leaders argue that the surge in U.S. dollar prices, high interest rates, Covid-19, and political instability have forced many institutions into default. They believe this opportunity will allow companies to recover, ultimately benefiting the wider economy.
A member of the screening committee, speaking on condition of anonymity, said: “About 1,250 applications have been filed. Reviewing and deciding on them will take considerable time. Each rescheduling case is different. Some applicants are willful defaulters, while others’ applications could be settled directly by their banks. There are also requests for interest waivers, which are beyond the committee’s jurisdiction. Selecting genuine cases is a challenging task.”
Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, said: “Bangladesh Bank has granted this facility based on reports from audit firms. Now, according to central bank guidelines, the banks themselves will decide whether or not to reschedule loans. However, rescheduling may hurt banks’ cash flow.”
A businessman who applied for rescheduling, speaking anonymously, said: “Hundreds of businesspeople are lobbying to get their applications shortlisted. Mine was selected at the committee meeting, and according to the decision, my loan should be restructured. Two banks have agreed, but other lending banks and financial institutions have not responded yet. So despite the committee’s decision, I am still a defaulter. The faster I can get out of default status, the better. Every passing day worsens the condition of my closed factory. If the restructuring is approved, it must be implemented quickly, otherwise it will be meaningless.”
Bangladesh Bank Governor Dr. Ahsan H. Mansur confirmed: “We have received 1,250 rescheduling applications, of which 250 have been shortlisted.”
Generally, banks try to recover defaulted loans with interest. During negotiations, borrowers often demand interest waivers. Borrowers believe that if banks are willing to cooperate, interest can be waived. Bank boards may approve such waivers. Recently, around 2,500 interest waiver applications have been submitted to commercial banks, which will finalize decisions independently without Bangladesh Bank’s intervention.
According to Section 49(cha) of the Bank Company Act, 1991, “In the interest of credit discipline, Bangladesh Bank may issue mandatory directives to all banks, or to a particular bank or group of banks, regarding loan classification and provisioning, loan write-off, rescheduling, or restructuring.”
When contacted, Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan told Ajker Patrika: “The rescheduling decision was made after the screening committee’s review in the interest of the country. However, this is not final yet. The Governor himself has clarified the matter at a press briefing. Ultimately, the banks will execute the rescheduling, as they are best placed to handle their own clients. Interest waiver decisions remain an internal issue of each bank.”
