Home ›› 29 Dec 2021 ›› Editorial
The pleas are getting louder. Businesses are seeking a further extension of the loan moratorium facility for another six months to one year, as the current facility offered by the Bangladesh Bank is going to expire on December 31, this year. The central bank is yet to respond to the demand made by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and the Bangladesh Jute Mills Association (BJMA).
Earlier, the Bangladesh Bank extended the loan repayment facility under relaxed conditions until 31 December, and borrowers can avail the opportunity by paying 25 per cent of their loans within this deadline. The FBCCI on Sunday sought an unconditional extension of loan classification facility till June next year to bring relief to traders, and expedite economic recovery from the pandemic. FBCCI President Md Jashim Uddin urged the Bangladesh Bank to announce an extension of the facility.
He came up with the call at the Annual General Meeting (AGM) 2019-2020 of FBCCI at the Officer’s Club Dhaka. On the other hand, considering the new Covid-19 variant Omicron, high freight fare, high price of raw jute and negative export growth, jute millers demanded an extension of the moratorium facility up to December, next year. On December 26, BJMA chairman Md Abul Hossain sent a letter to the governor of Bangladesh Bank in this regard. Industrialists at the jute industry said around 350 jute and jute spinning mills are now operating in Bangladesh, and they have around Tk 15,000 crore in bank loans, while around 25 per cent of it is classified.
With the fresh emergence of a new Covid variant, businesses globally have become cautious, and our local business community is also adopting a wait-and-see strategy before the hit of Omicron is felt. While how deadly and disrupting the nature of Omicron are yet to be known, its very emergence, however, made investors spooked and shelved business expansions to some extent.
As of September this year, the default loans in the banking sector in Bangladesh stood at Tk 101,150 crore, up by 14 per cent from nine months earlier and 7.1 per cent year-on-year after more than one and a half years despite a relaxed loan classification policy adopted by the central bank. It is to be noted that normal business activities resumed in the country only a couple of months ago.
While the export-focused industry made a turnaround in their earnings in recent months, small and medium enterprises that cater to the local market are yet to get momentum in their businesses as consumption is still tepid. Traders, retailers, and wholesalers are also on the recovery path, but still suffering from losses incurred during the peak Covid period. Despite the moratorium in place, as per the media reports, a handful of industrialist borrowers regularly have been servicing their loan installments. Those unwilling to repay their outstanding bank loans both in their good days and bad days are a real problem for both the banking sector and the economy. It is time to identify those willful defaulters.
Economists, senior bankers, and central bank officials, as reported in newspapers, are against any further extension of the loan moratorium facility. The reservations from these quarters are obvious, and certainly deserve merits from their points of views. Banks run after profit, economists largely for fundamentals, and the central bank seeks to contain soaring default loans. But the ground reality in the business area is still not rosy. The economy is reviving, but still fledgling.
Doing normal business now after nearly two years of incurring losses cannot be called a sound environment for all strata of businesses. Not only small and medium enterprises are yet to get a foothold in their trade, the huge services sector contributing the largest share in the gross domestic product is still sputtering. They are not in a position to maintain regular and timely debt servicing. They need further moratorium extension, or loan repayment policy relaxation at the least.
