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The volume of rescheduled loans contracted last year owing to the central bank’s moratorium facility on loan instalments
Banks rescheduled about Tk 13,457.8 crore of defaulted loans in 2020, which is the lowest in five years.
In 2019, banks had rescheduled a record Tk 50,186 crore as part of their frenetic efforts to clean up their balance sheet amid ballooning default loans in the sector.
The volume of rescheduled loans contracted last year owing to the central bank’s moratorium facility on loan instalments, said a top official of the central bank.
The central bank unveiled a moratorium facility in March last year that asked lenders not to consider businesspeople as defaulters if they fail to repay instalments until June 30 last year. The facility was extended twice to December 31 last year.
Thanks to the rescheduling, the size of soured loans looks small in the fourth quarter of last year.
At the end of December last year, total defaulted loans in the sector stood at Tk 88,734.1 crore, down 6 per cent from three months earlier, according to data from the Bangladesh Bank.
If the loan moratorium facility was not offered by the BB amid the pandemic, huge amounts of loans would have gone sour, said Emranul Huq, managing director of Dhaka Bank.
Then the lenders would have to use the instrument more to minimise the defaulted loans.
Loan rescheduling may increase in the March quarter as the moratorium facility on instalments of loans had ended in December last year, Huq added.
Loan rescheduling is not a very good practice as it is a short-time measure, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
“Such activities help the banks clean the book. But in the long run, it increases the defaulted loans.”
The lenders are interested in rescheduling their defaulted loans for making a profit as they have not kept provisioning against the rescheduled loans, said Mansur, also the chairman of BRAC Bank.
“The banks can declare dividends by regularising their defaulted loans.”
On the other hand, businesspeople can come out from the default zone by rescheduling their bad loans against only a 2 or 3 per cent down payment.
“Some unethical borrowers take the rescheduled facility again and again and they misuse the facility to take fresh loans,” said Mansur, a former official of the International Monetary Fund.
In 2019, defaulted loans amounting to Tk 50,186 crore were rescheduled, up 117.29 per cent from a year earlier, owing to the relaxed rescheduled policy offered by the central bank.
Along with the existing policy, the central bank on May 16, 2019 issued a special policy on loan rescheduling and one-time exit for defaulters to bring down the high amount of defaulted loans.
Under the special policy, defaulters got the opportunity to regularise their bad loans for 10 years, including one year’s grace period, at a 9 per cent interest rate by making just a 2 per cent down payment.
Defaulters were allowed to regularise their bad loans until February 17 last year under the special policy.
(DT)
