The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) yesterday requested Bangladesh Bank to extend the implementation of the relaxation policy on loan classification until July next year.
Businesses are still passing through dreadful times due to the slowdown stemming from the pandemic as economic activities are yet to become stable, said the country’s apex trade body.
For all latest news, follow The Daily Star’s Google News channel. But economists and bankers strongly opposed the FBCCI’s demand, reasoning that enabling another round of the relaxed policy would have a severe impact on the economy.
The trade body placed the proposal at its annual general meeting in Officers’ Club Dhaka. FBCCI President Md Jashim Uddin presided over the meeting.
The organisation has already sent a letter to the central bank, requesting to consider the issue positively.
Uddin told The Daily Star that the central bank’s relaxed loan classification policy would cease to come into effect this month.
But businesses are still compelled to purchase imported products, including industrial raw materials, at a much higher rate than that in the pre-pandemic period, he said.
On top of that, Omicron, the latest variant of the coronavirus, has already spread across the globe, which is why the FBCCI has urged the central bank to continue to keep the relaxed policy enabled, he said.
Borrowers, who have taken loans of up to Tk 10 crore from banks, should be treated as non-defaulters in spite of their inability to pay any instalment until June next year, according to the FBCCI proposal.
Clients, whose outstanding loans ranged from Tk 10 crore and above to Tk 500 crore, should be considered non-defaulters if they can give only 2 per cent of their payable instalments within the period.
Those who have over Tk 500 crore in loans should be allowed to avoid the default zone if they are able to pay 1 per cent of their payable instalments.
As per the central bank policy, borrowers are now allowed to avoid the default zone by providing only 25 per cent of the total amount payable in instalments against their loans this year.
The BB brought the loan moratorium policy into effect last year, enabling all borrowers to avoid having their loans classified.
Ahsan H Mansur, chairman of Brac Bank, said the central bank should not entertain the FBCCI’s demand as the economy has been strongly bouncing back.
Entrepreneurs of the small and medium enterprises are now repaying their loans efficiently, so extending the facility, especially for the big borrowers, is not a logical demand, he said.
The central bank should not issue any notice to this end, he said.
No bank tries to have its clients fall into a bad state as this eventually creates an unfavourable effect on its financial health, he said.
“Banks can follow a relaxed rule on their own in consideration of the affected businesses. The central bank can allow banks to do so on a case-to-case basis,” said Mansur, also executive director of the Policy Research Institute.
He pointed out that banker-customer relationships were good enough to handle the issue.
Salehuddin Ahmed, a former governor of the BB, echoed Mansur.
Extending the relaxed classification policy will not bring any good for banks, he said.
“The trade bodies usually express such type of expectations continuously, but the central bank should consider the issues in the interest of the economy,” he said.
Managing directors of two banks, on condition of anonymity given the sensitivity of the matter, said the lenders would not be able to repay depositors if the relaxed policy was extended further.
The private sector itself will face difficulties as banks will be unable to give out loans fulfilling requirements of businesses, they said.
They asked how banks would be able to reinvest their funds if they were unable to recover loans in the first place.
Private sector credit growth, which is now in the course of gaining tempo, will face another setback, they said.
Private sector credit growth in Bangladesh accelerated to 9.44 per cent in October, the highest in 13 months.
Last week, International Monetary Fund also advised the central bank to follow an orderly exit from all these general forbearance that were given to the banks as well as corporations.
