In a time when the banking sector is suffering badly due to a staggering amount of bad loans, it was hoped that the authorities concerned would go tough on loan defaulters. But instead, we are seeing the opposite. It seems that those who remained loan defaulters year after year are being rewarded.
In its latest guideline the Bangladesh Bank allowed loan defaulters to reschedule their classified loans by paying a down payment of only 2 per cent instead of the existing 10-50 per cent. Moreover, the accrued interests on the defaulted loans are being waived and defaulters are required to pay only the principal amount with only 9 per cent interest rate over a span of 10 years, while the existing interest rate is 12-16 per cent.That means, while the good borrowers, who make regular repayment on their bank loans, are paying an interest rate of 12-16 per cent on their loans, defaulters are charged only 9 per cent, which is totally unfair. This double standard policy on loan repayment is bound to demoralise good borrowers and encourage loan defaulting culture.
However, perhaps in order to justify the move, the central bank ordered the banks to give ‘good’ borrowers 10 per cent rebate from total interests on their loans. But the idea of giving incentives to good borrowers is not entirely new. The central bank introduced a similar incentive policy in March 2015, but the banks showed no interest to implement it. Therefore, the proposed incentive looks like mere eyewash.
Terming the new BB policy on loan repayment as ‘unrealistic’, economists opined that it could leave a devastating impact on banking sector by increasing defaulted loans. But only time can tell whether the policy will encourage loan defaulters to pay back their loans which has reportedly reached nearly Tk 1 lakh crore or they will remain defaulter as ever. But a lot will depend on our political will to tighten the noose on loan defaulters, giving meaningful incentives to good borrowers.
Meanwhile, many banks are facing significant degree of liquidity shortage. The government can tackle the cash shortfall by bringing back the thousands of crores of taka which has been siphoned out of the country.