We are not with loan defaulters: FBCCI

The Federation of Bangladesh Chambers of Commerce & Industry has said it will not patronise wilful loan defaulters and urged punitive measures against them.

“Around 90 per cent of good borrowers have been suffering only because of 10 per cent of bad borrowers,” FBCCI President Md Jashim Uddin said during a views-exchange meeting with chief executives of 32 commercial banks on Thursday.

“Action should be taken against wilful defaulters, but banks should cooperate with defaulters who are now helpless,” suggested FBCCI chief.

The meeting, titled “The role of the banking sector in the overall economic development and progress of the country in the current situation: Problems and possibilities,” was held at The Sheraton in Dhaka.

Managing directors and chief executives of 32 state-run, foreign and private commercial banks, including Association of Bankers, Bangladesh (ABB) President Ali Reza Iftekhar, attended the meeting.

On the other hand, FBCCI vice presidents Mostofa Azad Chowdhury Babu, Md Amin Helaly, Habib Ullah Dawn, MA Razzak Khan, among others, also attended the meeting.

ABB President and Eastern Bank Managing Director Ali Reza Iftekhar said that the biggest problem in the banking sector is defaulted loans.

“If a loan falls into default, it takes up to 10 years to recover the loans and there are also legal costs to be considered,” he pointed out.

He also said that banks need FBCCI’s support in recovering loans from wilful defaulters.

Echoing his view, Mutual Trust Bank Managing Director Syed Mahbubur Rahman said that non-performing loans (NPLs) are the main problem in the banking sector.

“Now the NPLs are near about 10 per cent, which is a big concern for the sector,” he added.

If the NPL rate remains low, there will be no problems in disbursing more loans, added Mahbubur Rahman.

“We seek FBCCI help on what can be done against these wilful defaulters,” he said.

Rupali Bank Managing Director Obayed Ullah Al Masud said that the FBCCI should arrange another meeting with bankers on how the defaulted loans can be recovered.

FBCCI President Md Jashim Uddin, in his written speech, said that the ongoing Covid-19 pandemic has hit almost every sector in the country’s economy.

“However, it has had a serious negative impact on some sectors, such as SMEs, transport, tourism, hotels, motels, restaurants, among others,” he added.

“The country’s economic activities remain very active amid the pandemic due to incentive packages worth Tk 1,87,679 crore announced by the government,” he said, adding that about 22 per cent of the total incentives have been allocated to the CMSE sector in Bangladesh, whereas the allocation is 36 per cent in India, 33 per cent in Thailand and 24 per cent in Malaysia.

He also added that there was no alternative but to prioritise the SME sector for the overall economic development of the country.

“For this, the stimulus loans have to be disbursed properly and the lending process should be simplified and collateral free,” he added.

“If the down payment rate for industrial loan rescheduling is fixed at a maximum of 1 to 2 per cent, industrialization in the country would be easier,” as per the written speech of FBCCI.

In reply, Ali Reza Iftekhar said, “It is true that we did not disburse 100 per cent of the CMSME stimulus package because it is not so easy to disburse SME loans as there are some documents needed for KYC (know your customer) before disbursing the loans.

He also added that the operational cost for small loans is very high.

“It is not only our job to disburse the loans, but we also have to observe that if the loans can be recovered,” he added.

“The 9 per cent interest rate for all loans is another challenge to achieve the credit growth because the operational costs of all loans are not same.”

FBCCI also urged that 5 to 7 years term loans need to be arranged for the SME sector, but the bankers said that banks are not the right place for long-term funding.

“It is not possible to lend for long-term by arranging short term deposits,” said Ali Reza Iftekhar.

“Capital market and bond market is the proper place for long-term funding,” said bankers, adding that the government should take initiatives to develop the bond market.

The City Bank Managing Director Mashrur Arefin, Standard Chartered Bangladesh Country Head Naser Ezaz Bijoy, IFIC Bank MD Mohammad Shah Alam Sarwar, Trust Bank MD Humaira Azam, Mercantile Bank MD Quamrul Islam Chowdhury, among others, also attended the meeting.