Economists react to Bangladesh Bank’s new loan rescheduling plan

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Bangladesh Bank (BB)’s new loan rescheduling policy gives borrowers a longer period to repay their loans. This is almost five times more than the previous policy while reimbursement has been reduced by four times. This means that many defaulters may take nearly 30 years to repay their loans.

Defaulters will also be able to reschedule their non-performing loans (NPLs) four times now, up from three times previously.

They will also only have to pay 4.5% of the overdue amount which was 15% for rescheduling the loan.

The Dhaka Tribune asked bankers and economists what they thought of this new policy.

“Central bank policy will make failing banks happy”

Zahid Husseinformer Chief Economist of the Dhaka Office of the World Bank

Everything is returning to the form he had before the Covid-19 hit. Many businessmen are in good shape with their growing cars, homes and assets. However, they do not repay their loans. The new central bank policy will make them happy.

A lot of people run businesses and still don’t repay their loans. They form several companies and invest in them, even if the companies in whose name they take out loans are not in a good position.

Businessmen demanded that they should not be considered defaulters in any way so as not to lose access to credit, and the central bank formulated its new policy based on their demand. When making decisions, Bangladesh Bank should think of the whole banking sector and not only think of businessmen.

“The bank’s loan default management will be better”

Selim RF HussainChairman of Bangladesh Bankers Association (ABB) and Managing Director and CEO of Brac Bank

The current governor undertook various reforms after joining. Bangladesh Bank is now playing a pioneering role among many organizations in the country. All this is possible thanks to the active role of the current governor.

Previously, the central bank had more to do with borrowers. They did the main calculations. From now on, this responsibility will be in the hands of the bank.

This will increase the bank’s ability to handle delinquent loans. Many say that debtors received a significant discount. But I don’t think so. I think now the bank’s default loan management will be better.

“Loan Rescheduling Policy May Create Liquidity Crisis”

Saleh Uddin AhmedFormer Governor of Bangladesh Bank

The banking sector is like the nerve of the economy. If this sector is affected, the whole economy will be affected as well.

The wholesale concessions offered by the central bank in its new loan rescheduling policy are undesirable. Collection of overdue loans needs to be strengthened.

The recent easing granted to bank borrowers on loan rescheduling could create a liquidity crisis in banks.

Due to the many offers, the money lent will not return to the banks. Banks will face a liquidity crunch as a result. Offers should therefore have been made on a case-by-case basis.

Currently, the banking industry as a whole is facing various challenges and only a handful of people control its direction. Before making any changes to banking rules and regulations, there should have been consultations with experts and people. There is no review of existing rules and even a small group dominates policy formulation.

“It is not desirable to impose a weak plan on the banking sector to save companies”

Ashikur RahmanSenior Economist at the Policy Research Institute (PRI) and Member Secretary of the Bangladesh Economists’ Forum (BEF)

Considering the current global economy, I think the benefit of loan repayment tenure and NPL installment percentage given here can be discussed. The first is good governance and the second is the current world situation.

The global economy is not in very good shape. His influence over Bangladesh is also growing.

Inflation increases in parallel with the rise in prices of many products on the international market. In addition, the situation of new outbreaks of Covid-19 is also worrying.

In this situation, the loan residual benefit can provide some relief to businesses. However, the amount and the discount time could have been more thoughtful. It is not desirable to impose a weak plan on the banking sector to save companies.

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