Loan reschedules increased abnormally after relaxation

Tk 29,279.82 cr rescheduled in 2022

Staff Correspondent: The amount of rescheduled loans has increased abnormally after the relaxation of loan rescheduling policy. In 2022, Tk 29,279.82 crore of loans were rescheduled in the bank sector. The amount of rescheduled loans in 2021 was Tk 12,379.26 crore. In other words, compared to 2021, Tk 16,900 crore of debt rescheduling has increased in 2022. This information is known from Bangladesh Bank sources.
Sector stakeholders have blamed the central bank’s laxity as the reason for the increase in rescheduled loans. They said that before the relaxation of Bangladesh Bank, to regularize defaulted loans, 10 to 30 percent of money had to be deposited. Now it can be done by depositing 2.5 to 4.5 percent. Previously, the maximum repayment period of these loans was two years. Now taking 5 to 8 years. Apart from this, earlier, if the loans were to be regularized under special facilities, the Central Bank’s approval was required. Now that power has been handed over to the banks.
According to Bangladesh Bank’s data analysis, after the relaxation of the rescheduling policy on July 18 last year, the last six months of the year showed an unusual picture. In the six months from January to June 2022, defaulted loans were rescheduled to the tune of Tk 5,960,450,000. In the last six months (July-December) Tk 23,319.37 crore were rescheduled. In the last six months of 2021 (July-December) the amount was Tk 8,116 crore.
Besides, the picture in the last quarter of last year is more unusual.
According to the data of Bangladesh Bank, Tk 17,768 crore has been rescheduled (See Page-2)
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in the last quarter of last year (October-December). In the previous quarter (July-September) which was Tk 5,551 crore. In the quarter at the end of 2021, its amount was Tk 6,976 crore. This suggests that rescheduled loans are increasing abnormally after the central bank’s easing.
When asked about this, the executive director of the Policy Research Institute (PRI) Ahsan H Mansoor told that due to Bangladesh Bank’s concessions, no one would have defaulted even if the loan was not paid during the Covid period. Now that the facility is gone, the loan tends to be rescheduled to avoid default. Besides, it is rescheduling to get a new loan out of default. Hence abnormally increased rescheduled loans.
He said that after the relaxation of Bangladesh Bank policy, the banks are giving more benefits to the customers. Because the board of banks has full power. Bangladesh Bank does not need to take any permission in this case. If the boards of the banks were good, this problem would not have happened. Then they rescheduled after checking. The way it is being rescheduled now, it is a loss for the bank. Here the customer is getting benefits. So, Bangladesh Bank should be stricter.
Meanwhile, with the increase in rescheduled loans, the amount of interest waiver has also increased. In 2021, against the rescheduled loans of Tk 12,379.26 crore, interest of Tk 1,855,170,000 was waived off. In 2022, Tk 29,279 crore was rescheduled against Tk 556.18 crore. That is, compared to 2021, the interest waiver has increased by Tk 3,201 crore in 2022. In the last quarter of last year (October-December) Tk 1,898.44 crore of interest has been waived off.
Bankers said that the Central Bank has been giving concessions in recent years in various ways to reduce the defaulted loans of the banking sector. Especially after the start of the impact of Corona, even if no one paid any money in 2020, he was not defaulted. In 2021, a customer is no longer in default if someone pays 15 percent of what they are supposed to repay. Earlier in 2019, a special arrangement rescheduled huge loans for 10 years with just 2 percent downpayment.
Before that, various relaxations were given including rescheduling with special consideration due to restructuring of large amount of debt of Tk 500 crore due to political unrest. Due to repeated laxities, some customers are chasing benefits rather than repayment. And due to these concessions, the real picture of defaulted loans of the banking sector is not reflected.
According to the data of Bangladesh Bank, at the end of last December, the amount of defaulted loans in the banking sector stood at Tk 120,656 crore. That is 8.16 percent of the disbursed debt till that time. As of December 2021, the amount of defaulted loans was Tk 103,274 crore. In the last one year, defaulted loans have increased by Tk 17,383 crore. Apart from this, there are Tk 43,557 crore of defaulted loans.
Bankers say that whatever the number of defaulted loans in the country is shown on the documents, the actual figure is almost three times higher than that. Many groups of loans are not collected but defaulted year after year. Again, the same loan is rescheduled again and again and the loan is kept regular.