BB for chasing defaulters shrugging off Covid-induced losses

The governor of Bangladesh Bank (BB) has directed the Managing Directors (MDs) of the banks to recover the defaulted loans apparently gesturing that the Covid-induced economic shocks are absorbed.

At the same time, he directed the banks to collect regular instalments after the expiry of the loan tenure. In other words, the loans or instalments that will expire from the beginning of this year will have to be recovered from now on.

BB Governor Fazle Kabir gave the instructions at an online meeting with the MDs of commercial banks last week. The meeting was attended by senior officials of the central bank and top executives of commercial banks. This was the first bankers' meeting in this year.

During the meeting, Governor Fazle Kabir made it very clear to the MDs of the banks that no more concessions would be given for debt collection and defaulted loans due to coronavirus. From now on, all types of loans have to be recovered regularly. Emphasis should be placed on recovery of defaulted loans thereby reducing the defaulted debts not by deletion. We have to keep an eye on not having any new defaulter, he said.

After the meeting, the bank's MDs said that due to the coronavirus pandemic the banks could not collect any loan last year. As a result, debt collection has been negatively affected. This year too, many are hoping that the moratorium on repayment of loan instalments may be extended.

They also said due to this, even though the instalment period has expired, many are not repaying the loans.

The MD’s also said that they do not want any more concessions on defaulted loans. Failure to repay the loan regularly from now on will result in default as per the prevailing rules.

The central bank governor expressed dissatisfaction with the slow implementation of the incentive packages.

Criticizing the reluctance of banks to implement incentive package in cottage, small and medium industries, he said the deadline for implementation of the package has been extended till March 31.

A central bank report presented at the meeting said 21 financial stimulus packages amounting to Tk 1,20,153crore have been announced to address the potential economic impact of the coronavirus outbreak in Bangladesh and to revive country's economic activities, which is 4.30 percent of the GDP.

Of these, 9 packages are being implemented through BB. These are Tk 33,000 crore for large scale industries and services, Tk 6,000 crore for foreign companies, Tk 2,000 crore for April and May interest subsidy for commercial banks, Tk 20,000 crore in cottage, small and medium enterprises and Tk 5,000 crore in agriculture. Tk 5,000 crore for the payment of salaries of workers working in export-oriented industries, Tk5000 crore in prepayment credit for export sector, Tk 3,000 crore for low-income professionals, small farmers and traders, Tk 12,650 crore for export development fund and Tk 2,000 crore for credit guarantee scheme for SME sector.

At the meeting, the central bank was asked to provide loans as per the demand of the customers from the incentive packages which will continue. Besides, warning was given about debt disbursements.

In this regard, the executives of the banks said that if the conditions of incentive are implemented, there will be no delay in the disbursement of loans.

However, very small industries will not able to meet the loan conditions. Besides, they are not interested in coming to the bank. Due to this the distribution of loans in this sector is less. Even then, small entrepreneurs are being encouraged to avail loans through the branches.

During the meeting, the central bank said that the bills of local and foreign LCs opened for import are not being paid regularly which is tarnishing the image of the banks.

At the same time, complaints are also coming to BB due to non-payment of foreign debts. Bangladesh is being discredited abroad in consequence.

In this context, the MDs of the banks were instructed to pay the outstanding import bills quickly. If any bank does not pay the arrears of import without any reasonable cause, disciplinary action will be taken. If necessary, the bill will be paid by deducting money from the accounts of commercial banks.

According to the MDs, the banks have strong objections against some of them causing the delay. They said the matter would be settled on the basis of bilateral talks.

ask/wi