New finance minister wants fresh ideas to push default loan rate down

After taking charge of the finance ministry, AHM Mustafa Kamal has asked the banks to come up with new strategies to push down the rate of default loan, which has crossed the two-digit mark.

Top executives of the state-owned banks and financial institutions greeted the minister, who was in charge of the planning ministry for the past five years, at his new ministry on Monday after the swearing-in ceremony.

Economists view the default loans as a big challenge for Bangladesh’s banking sector. AMA Muhith, who was finance minister for the past decade, also acknowledged the problem.

According to information he gave to the outgoing parliament, 230,658 borrowers were yet to repay    Tk 1.31 trillion as of June last year. 

“We will not mix up the bad with the good. We will neither send anyone to jail, nor will we stop (lending),” Kamal said in his first meeting as finance minister, asking the bankers to find new ways to get back the money lent.

He asked them to keep in mind that the amount of bad loans rises when the difference between lending rate and deposit rate (interest rate spread) goes up.

The minister also said the banks should set a target to bring the rate of nonperforming loan to 7-8 percent from 13 percent. 

“You must act tough to bring the rate down. Please forget about your relatives (while lending). We won’t keep the borrowers who repay and the defaulters on the same page. We will offer incentive for the repayers if necessary,” Kamal said.

He asked bank executives to properly examine loan applications.

“And we must work to make the people realise that they can make profit by taking loans,” he added