Amid criticism of the Bangladesh Bank for relaxing rules for repayment and rescheduling, the authorities have reported a Tk 118.16 billion rise in the size of defaulted loans in the last quarter of 2021-22 fiscal year.
After June, the amount of defaulted debt stood at 8.96 percent of the total loans disbursed by the banks, up from 8.53 percent in March.
The default loans totalled over Tk 1.25 trillion after the end of the fiscal year, Bangladesh Bank spokesperson Serajul Islam said on Thursday. In March, defaulted loans stood over Tk 1.13 trillion.
The amount of disbursed loans stood at Tk 13.29 trillion at the end of March and it increased to around Tk 14 trillion at the end of June.
According to the central bank, the default debts in the banks rose by 27.6 percent year on year.
The Bangladesh Bank on Jul 18 announced a new loan rescheduling policy after nine years to “reduce the pressure on the economy”. The new policy includes an extension of the grace period for loan repayment and other time limits to ease pressure on businesses.
Defaulters will also be allowed to reschedule their non-performing loans (NPLs) four times in contrast to the previous three times.
In June, Bangladesh Bank said no companies from “major industries” will be deemed to be defaulters if they manage to repay at least half of their instalments.
As the latest relaxation of rules will be effective until December, analysts say it will not be possible to get a clear picture of the situation before the data for March 2023 are published.
Bangladesh Bank has introduced several loan incentives and policy benefits to help the economy recover from the impact of the pandemic.
A notable policy was not to penalise companies for being unable to make their loan payments. Even last year, businesses were able to avoid defaulting on their loans if they were to deposit at least 15 percent of it.
But leaders from the FBCCI, the apex business association in the country, recently met with Bangladesh Bank Governor Fazle Kabir to demand an extension for the repayment for incentivised loans, waivers for failing to repay last year’s loan instalments and an extension of default forgiveness until this December.
Following the meeting, the central bank issued a statement saying that it would make a ‘reasonable’ decision on the issue after taking the opinions of bankers into consideration.
It then announced the easing of the loan burden until February 2023
Earlier, scheduled banks had to ask for approval from the central bank to regularise special facilities loans. But the new policy gave the sole power to the boards of directors to decide what benefits will be given to defaulters.
Ahsan H Mansur, analyst and chairman of BRAC Bank, said, “The banks will need to be reasonable while rescheduling debts. It’ll be of no use if they give the facilities to customers for whom defaulting has become a habit.”