The Bangladesh Bank’s circular that allowed the loan defaulters to get their credit rescheduled at low interest has been halted following a High Court order.
The HC on Tuesday stayed until June 24 the central bank’s circular to grant new loans to defaulters.A division bench comprised of Justice FRM Nazmul Ahasan and Justice KM Kamrul Kader passed the order.
The HC observed that giving such privilege to loan defaulters is tantamount to feeding snakes with milk and banana.
The court ruling came following a writ petition filed by Human Rights and Peace for Bangladesh (HRPB).
The HC issued a status-quo on the Bangladesh Bank notice that allowed defaulters to reschedule their bank loans and get further loan.
The central bank gave an opportunity to big loan defaulters through the notice, which creates scope of Tk 1 lakh crore laundering, the court observed.
The HC said, “The central bank is making the genuine businessmen pay 14 to 15 percent interest which is discrimination.”It observed that the central bank is yet to execute the prime minister’s instruction to lower the interest rate to a single digit for bank loans.
Advocate Manzill Murshid, counsel and president of HRPB, said the defaulters will not be able to have their loans rescheduled by paying a 2 percent down payment following the High Court order.
“The central bank’s new policy will encourage the bank defaulters, and subsequently, the commercial banks will suffer a financial crisis. That’s why we filed a petition with the court, seeking to stop the implementation of the circular,” said Manzill.
Bangladesh Bank issued loan rescheduling policy in 2015, regularising Tk150 billion in credit taken by 11 industrial groups, but only two of these groups have been repaying.
According to the latest data, the total default loans in the banks in Bangladesh rose from about Tk225 billion in the beginning of 2009 to over Tk1.3 trillion by the end of 2018, which is more than a third of the national budget for 2018-19 fiscal year.
On May 15 this year, the central bank issued a directive, saying a maximum 9 percent interest will be charged on the rescheduled loans and the tenure for the repayment is 10 years with a grace period of one year.
Under the existing policy, the defaulters can reschedule their classified loans by making a down payment of 10 to 50 percent.
Earlier on May 16, the High Court directed the Bangladesh Bank authorities to submit a list of loan defaulters exceeding the debt of Tk1 crore by June 24.
The court also asked for a report as to how much money had been laundered to different countries and what steps were taken to bring it back.
Bangladesh Bank officials will face legal action if they do not comply with the order, the HC cautioned.
A division bench comprising Justice FRM Nazmul Ahasan and Justice KM Kamrul Kader passed the order after the central bank refused to disclose the information on the day.
Quoting Article 46 of the Bangladesh Bank Order 1972, the central bank’s counsel Barrister M Moniruzzaman told the court that there is a legal restriction on the part of the bank to disclose the names of the defaulters.
Manzill Murshid argued that the central bank is trying to use Article 46 as a shield to protect the loan defaulters.
As per the Article 102 of the Constitution, any individual or organization is bound to comply with the order passed by the High Court, he added.
The HC cautioned the Bangladesh Bank authorities that they will face action if they do not submit a list of the loan defaulters within the stipulated time.