Dhaka (Barta24): Measures underway to provide more facilities for the loan defaulters. At the time of rescheduling or renewal of the loan the defaulter shall have to pay only 1 percent of the provision amount or Taka one crore which is less.
Besides, the repayment time will be fifteen years including the moratorium of two years. It means of 15 years the loanee will not have to pay a single farthing while repaying loan installments. At the time of rescheduling there will be simple interest of 7 percent only.
A high powered committee of financial establishments has prepared all these proposals to place to Finance Minister AHM Mustafa Kamal. Economists of the country think that if this gets Minister’s nod then the deliberate defaulters will get extra facilities.
Last year to review the affected business people, entrepreneurs, industrialists who wanted to regularize their loan in different banks led to the formation of the eight members high powered committee. The committee included one official from financial divisions, three chairmen of government and private banks and four CEO/ Managing directors.
That committee has proposed several recommendations in their report for rescheduling default loans. Bangladesh Bank (BB) has given their opinion on the recommendations of the committee. It was found that the central bank does not agree with most of the recommendations. However, the proposal being underway for the Finance Minister did not take cognizance of the disagreement of the central bank.
The committee in their report said that there is necessity of bailing out or making bad loan into good loan for defaulters. In this case there is proposal for rescheduling without any down payment.
The central bank showed objection to it and said that if this chance is given the defaulters will misuse it. Bangladesh Bank (BB) agrees to the proposal of down payment of one percent or Taka one crore of loan amount.
Regarding proposed repayment time frame of 15 years BB has opined that the capital loan be given the time of six years including two year moratorium and for the term loan highest ten year time can be given for making repayments in installments. Without paying heed to BB the Ministry suggests to consider it case to case.
The committee proposed for imposition of simple interest of seven percent. But BB opposed it saying that according to existing policy the interest shall have to be counted as compound interest according to (BPRPD circular no. 27 dated 31 August, 2010 & BPRD circular letter no. 14 dated 7 December, 2010)is in force. So the proposal is not in conformity with the existing system. The banks to the contrary will be compelled to give extra pressure on the good debtors to recover their losses.
Moreover, if simple interest is introduced in case of rescheduling default loan there is apprehensions that the good debtors will be deliberate defaulters. Again, in banking business cost of fund is an important indicator. In the process of rescheduling default or bad loans the authority must look into the interest of the depositors. How much facilities the bad debtors can be given, it should be determined along side the expenditure of the banks’ property, liability, management, cost of fund and liquidity situation.
The committee proposed the repayment of installments on the basis of three months. The committee said the installments shall be recovered at the ratio of original loan amount and interest. BB has opined that the installments shall have to be determined on the basis of the mutual relation between the customer and bank.