Uproot loan default culture

23 October, 2019 12:00 AM printer

Default loan culture is a common vice that retarded the ability to play facilitative roles of the financial sector in the ongoing development endeavour of the government. Private sector deserves financial assistance to grow and thereby create new jobs. But, in many instances, deserving companies find it hard to get it because a big chunk of money remains with a small number of entrepreneurs who have failed to repay bank loans in due time. Due to the liquidity crisis banks cannot lower the interest rate on loans.

 A significant number of loan defaulters constantly reschedule their dues while, in many cases, they are found to be less interested in repaying. As a result, the amount of classified loan is rocketing high. This is a bad omen for the country's financial sector. This lackadaisical attitude of the so-called businessmen is not acceptable and is contrary to the spirit of driving the country forward.

The default loan culture is a matter of concern; entrepreneurs and other stakeholders are eager to see a banking system free from high percentage of bad loans. The government is desperately trying to come out of this default loan plague for paving the country's unhindered progressive journey. From time to time experts opined in favour of stricter rescheduling of default loans.

The government allowed borrowers to reschedule their loans for 10 years by giving a down payment of only 2 per cent through a circular issued on May with stricter terms and conditions. As per the new rescheduling terms, the defaulters are required to pay 9 per cent interest instead of 10-14 per cent. This is a much-awaited move for streamlining the country's banking sector.

It is a delight to note that a good number of small and medium level entrepreneurs responded enthusiastically to the government's call for loan rescheduling though some giant defaulters are showing lukewarm response. This is going to initiate an ice-breaking era towards ending the default loan regime.  So far around 4,000 loan rescheduling proposals have been submitted and more are expected in the extended time. We hope this time the loan default culture will be slowly uprooted!