Experts have come down heavily on the latest Bangladesh Bank policy allowing defaulters to reschedule loans by paying 2 percent down-payment for a maximum period of 10 years.
They think that offering such a benefit will increase the number of wilful defaulter and discourage good borrowers from repaying loans.
The central bank through a circular on Thursday offered the waivers to the loan defaulters.
World Bank Lead Economist for Dhaka office Dr Zahid Hossain said that all defaulters would take this opportunity.
He, however, said that the policy would reduce the amount of defaulted loan but pointed out it didn’t address the issue of those who would be defaulters again.
The law against the defaulters needed to be tightened and its implementation was necessary, according to Hossain.
Providing rebate to the good borrowers is a positive step but positive result of the initiatives will depend on its proper implementation, he added.
The new waivers for defaulters would cast a shadow over the whole banking sector, says Toufiq Ahmed Chowdhury, a former director general of Bangladesh Institute of Bank Management.
“Good borrowers will be discouraged to repay their loans. The latest directives of the central bank will jeopardize the banking sector, while loan defaulters will gain undue advantage,” he said.
The new scheme would push the entire banking sector to a grave danger and it will not reduce defaulted loans, says Khondokar Ibrahim Khaled.
Internationally Bangladeshi banks would go down and not be evaluated in international standards, according to the former central bank deputy governor.
“As of December 2018, the defaulted loans stood at Tk 800 billion, which would be converted into good loan with just 2 percent down payment.”
0n the other hand, Tk 800 billion in the form of provision against defaulted loans will go to the bank’s directors as a dividend, he added.
"There is a kind of alarm among us. Good borrowers may try to take advantage of this,” said Association of Bankers, Bangladesh (ABB) Chairman and Dhaka Bank Managing Director Syed Mahbubur Rahman.
He said: “We are willing to provide this facility for real businessmen who are in real trouble. We have no objection in this. But the benefit should not for wilful defaulters.”
"The circular has just been issued; wait a few days; its effects will be understood," Rahman added.
As per the central bank circular, the borrowers will also be able to avail 'One Time Exit' facility by clearing all dues by 360 days after approving such facility by the banks concerned.
To get the special facilities the interested borrowers will have to apply to the banks concerned within 90 days from the date of issuing the notification for availing such, it added.
The interest rate on rescheduled loans will be 3 percent higher than the bank's cost of fund. But the interest rate will have to be kept within 9 percent. The interest will be imposed on the rescheduled loans from Jan 1, 2019.