Should loan moratorium continue? – Bankers divided in opinions

Bankers have come up with mixed reactions to a demand for extending a special loan repayment facility – known as a moratorium – which businesses have enjoyed for two long years following the Covid-19 outbreak in 2020.

The managing directors of banks upheld their arguments at a bankers' meeting with Bangladesh Bank Governor Fazle Kabir in the chair on Thursday. Several deputy governors were also present.

According to meeting sources, several of the managing directors said businessmen have received the special benefit of repaying loans for two long years. Those who were not affected by the pandemic also took this advantage of the facility.

Although many good institutions had an opportunity to repay the loans at that time, they have not done that. Now the business is fully operational so banks will face losses if the facility is given afresh, they added.

But, the MDs of other banks presented their arguments in favour of increasing the loan repayment facility anew. They said the Covid-19 is not fully over yet. Russia's war in Ukraine has also had a major impact on the rise in prices of all kinds of goods and exports. Therefore, the moratorium should be given till December this year with receiving a reasonable amount of down payment.

Sirajul Islam, spokesperson and executive director of the Bangladesh Bank, said, there has been a mixed reaction among the bankers regarding the special facility of loan repayment. Several bankers have spoken out in favour of it (moratorium), while some bankers have also spoken out against it, saying that it would allow borrowers to repay their loans with a certain amount of down payment. The governor said the central bank would consider their applications.

He further said that the meeting has been advised to give special importance to expeditious disposal of pending cases in the money loan court. Because of the lack of experienced lawyers, cases are often protracted. This is detrimental to banks' loan collection activities. The Bangladesh Bank has urged the authorities concerned to take necessary steps for speedy disposal of cases.

Meanwhile, Selim RF Hussain, chairman of Association of Bankers, Bangladesh (ABB) and MD of Brac Bank, said this meeting has a special significance.

"So far we have had 22 meetings with this governor. Today's meeting is our last. It was a very emotional issue. There were a lot of talks about new things," he added.

The ABB chairman said, "We are thinking of setting up a hospital in the banking sector. We also talked about creating a bankers' club in the capital." 

"The pressure on our currency exchange rates is now somewhat stable. We hope it will become normalised further in the next one month," he added.

Asked if there was a discussion about raising the interest rate cap, Selim RF Hussain said there was no separate talk about it.

"But now the lending rate is not exactly 9%, it is like 6% for top customers. We still have 3% space. There is enough time to get there. If it needs to be reviewed in future, the Bangladesh Bank will definitely do it. At the moment, there is no need to withdraw the cap immediately."

He said the moratorium proposal of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) was discussed at the meeting in detail.

"Later a circular will be issued by coordinating together. We have to wait for some time for that," he added.

Earlier, due to the coronavirus effects, borrowers were free from default without repaying any loan in 2020. However, they enjoyed the facility by repaying just 15% of the loans in the following year. The central bank has withdrawn that facility from January this year.

Asked about the bankers returning their jobs as per the instructions of the Bangladesh Bank, Selim RF Hussain said there was no discussion in the meeting in this regard.

However, on behalf of ABB, he said, every bank will comply with the instructions somewhat.

"We want all banks to abide by the regulation that came. There may be a deviation for a couple of people, but we have heard that most of the banks have reinstated their laid-off employees. Our bank has given back jobs to about 90 people. I think those who are left will be taken back to work if they fall within the rules," he added.

When he was told that 3,500 people have not yet got back their jobs, the ABB chairman said, "I don't think the number you have is correct. Many may have been fired for various reasons."