Bangladesh Bank warns habitual defaulters of onsequences 

      Bangladesh Bank Governor Dr Atiur Rahman announces monetary policy for second half fiscal year yesterday  

Bangladesh Bank has decided to offer incentives for good borrowers having regular loan repayment track records, but warned of coming down hard on willful defaulters.

“I have already instructed the related department to make a rebate policy for the good entrepreneurs who pay loan regularly,” said Governor Atiur Rahman, unveiling monetary policy statement for the second half of the current fiscal year at Bangladesh Bank headquarters in Dhaka yesterday. 

He said banking governance will be up-scaled further to clamp down on loan delinquencies. While the cases of credit worthy borrowers will be reviewed, habitual defaulters will face lawful consequences, he cautioned. 

The governor announced the plan for incentive two days after blessing big defaulters with a new restructuring policy to facilitate their loan repayment.

In December last, it also relaxed the loan reschedule policy to favour the big borrowers who failed to make installment payment due to political turmoil. 

To defend the loan restructuring policy for defaulters, the governor said it was formulated for the sake of country’s economy and employment. Ultimately, the banks will be the gainer because of this policy as some money would go to their pockets, he said. 

“The defaulters, though, get preference from the central bank repeatedly on excuse of the political unrest but so far good borrowers, who maintain their loan repayment regular even after facing the same difficulties, did not get any favour.” 

In this situation, he said, the central bank will formulate a specific policy to reward the good borrowers. “While making any policy, we do not usually take any big or small borrowers into our consideration,” he said replying to a question.

Echoing the governor, Deputy Governor SK Sur Chowdhury said: “The loan restructuring policy was done as big companies face systematic risks, which may hit the country’s economy.” 

The monetary policy statement stated that the central bank firmly discouraged the abetting of habitual and willful loan repayment defaulter. It also created room for helping out recovery of genuine businesses distressed by circumstances beyond their control with realistic debt restructuring in line with international best practices.

Former BB Governor Salehuddin Ahmed welcomed the decision to award the good entrepreneurs saying it will encourage them to keep growing.

But he strongly criticised the incentives given to the big defaulters saying they did not deserve any benefits as regular loan defaulters are good for nothing.  

According to the policy for the big borrowers, only those who have defaulted loans worth over Tk500 crore will be able to enroll with the new package.

The highest payment tenure will be 12 years for restructured term loans six years for demand and current loans. The rate of down-payment will be 2% for loans less than Tk1,000 crore and 1% for those above.

The banks will charge a minimum interest rate of 1% plus cost of fund against the restructured loans. The privileged clients will not be able to declare any cash dividend in the first three years.

After restructuring, they may borrow up to 50% of the last approved amount for demand and current loans and 60% for term loans. The loans will be classified as special mention account and banks would maintain provision at required rates with the additional 1%.