-30 pc reschedule loan defaulted again
-Legal complexity one of the impediments
Abu Sazzad: Banking experts expressed their concern for growing the non-performance loans (NPLs) against reschedule loans but the government introduced such policy to reduce default loans from the banking sector. The government initiative completely went in vain to relax the loan rescheduling policy for recovering NPLs as well as revamping banking sector of the country, they claimed.
The policy became a mockery as such policy is helping the large stakeholders to avail more loans against their bad debt, they observed.
Instead of declining NPLs, the rescheduling loan defaulted significantly which is indicating that the government has completely failed to present a fruitful outcome for the banking sector, they claimed.
Such policy would help the dishonest stakeholders to receive higher amount of loan from the banking sector to represent the profile of the sick industries, they opined.
Schedule banks of the country rescheduled loans amounting to Tk 23,210 crore in 2018. Shockingly, some 30 percent re-scheduling loans are now defaulted, according to the latest data of Financial Stability Report of Bangladesh Bank.
In this backdrop, the loan rescheduling amount was Tk 19,120 crore in 2017, Tk 15,420 crore in 2016, Tk 19,140 crore in 2015 and Tk 12,350 crore in 2014.
Bank to bank borrowing stood at Tk 70,610 crore for liquidity crunch in the last year, said the Bangladesh Bank data. The central bank’s financial stability reports for 2016 and 2017 also expressed concern about the growing tendency of loan rescheduling in the banking sector.
Poor due diligence, influenced lending, fraud and negligence in compliance with risk management practices could be the reasons for the rise in rescheduled loans, according to the reports.
Talking to Daily Industry yesterday, Dr Salehuddin Ahmed, former central bank governor told that the loan rescheduling facilities were provided by mass.
Commenting on the achievement of the government related with the introduction of the reschedule loan policy, Salehuddin said the attainment is ‘uncultured’ and it is simply a ‘mockery’.
The policy of rescheduling of loan is affecting ‘credit culture’, he said adding the rise of loan rescheduling in recent times has created an extra pressure on country’s banking sector.
He underscored the need for changing mind set of corrupt officials as many of them have offered loans to clients without verifying their actual business condition, he added.
Ahmed recommended that banks should extend their cooperation to defaulters whose businesses are in crisis for genuine reasons.
Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh said lenders should reschedule the default loans after scrutinising the cash flow of the businesses owned by defaulters.”Otherwise, the rescheduled loans will turn into NPL again”, he said.
But in recent years habitual defaulters have put pressure on the central bank to reschedule their non-performing loans by sidestepping banking rules, said a BB official.
The loan rescheduling opportunity has failed to recover the expected level of NPLs as many of the customers who had earlier agreed to regularise their loans with due payment, denied to pay money at the last moment, Rahman added.
Centre for Policy Dialogue Distinguished Fellow Prof Mustafizur Rahman said that the lowering of interest rate for reschedule loan would not make any change to recover bad debt as most of the big fishes are willful defaulters.
Most of the bad credit holders are willful defaulters and they frequently use the weakness of money court as well as lack of governance in banks, he claimed. Banks have been facing a fresh hurdle to recovering defaulted loans in recent weeks following the government’s move to give easy rescheduling opportunity for defaulted loans, Rahman added.
In this backdrop, total default loan in the banking sector almost stood at Tk 100,000 crore as on December last but the sources said the bad debt is over the central bank calculation.
However, the rising NPL is becoming a serious concern for the economy of the country. Nearly, 50 percent of the loans belong to half a dozen state-owned commercial banks. The lower recovery against NPL is impeding on fresh investment in the private sector as well as industrialisation in the country.
Industry insiders said political intervention has worsened the corporate governance in the banking sector. The government should promptly take action to restore discipline in the financial sector, they said adding legal complexities are one of the impediments to recovering the NPLs from habitual defaulters.