Defaulters not entitled to coronavirus bailout funds: BB

Loan defaulters will not get any money from the Tk 727.5 billion stimulus announced by the government for industries to cope up with the impacts of the novel coronavirus pandemic.

The borrowers who have their debts rescheduled more than three times through a special scheme for defaulters to repay will not get the bailout funds either, Bangladesh Bank said in a notice on Sunday.

Only the firms that have faced damage due to the pandemic will get the bailout funds, it clarified.

Economists AB Mirza Azizul Islam and Ahsan H Mansur welcomed the guideline. Both had warned the government against giving loans to defaulters from the bailout funds.   

Mirza Azizul, a former caretaker government adviser, believes the central bank has made the right call. Mansur, the executive director at the Policy Research Institute, agrees.  

“The loans will be repaid because of this [decision]. The amount of bad debts won’t increase,” Mirza Azizul said.

The loans disbursed by the banks stood over Tk 10.11 trillion by December last year. The amount of default loan was Tk 943.31 billion, or 9.32 percent of the total credit.

Out of the Tk 727.5 billion stimulus announced by Prime Minister Sheikh Hasina on Apr 5, Tk 300 billion has been set aside for distribution as working capital among the industry and service sector firms riven by the pandemic.  

The entrepreneurs will get the funds as loans from banks with the current lending rate of 9 percent, but the government will pay half the interest in subsidy.

The banks will set their ceilings of loans under the package based on the amounts they lent until Dec 31. But the central bank can revise the ceilings.

The package’s term will be three years, but the subsidy will be available against each borrower for one year.

The central bank said it would set up a “special monitoring unit” to oversee the distribution of the funds.