Pressure from traders, banks delays decision on loan repayment

Under pressure from both traders and banks, the Bangladesh Bank has not been able to make an immediate decision on whether to extend the facility of non-payment of loan instalments.

At a meeting with the central bank governor on Wednesday, bankers opined not to extend the facility in the new year, while traders want a time extension.

Asked about this, Abu Farah Md Naser, executive director of the central bank, told The Business Standard, "No final decision has been made on whether to extend the facility of non-payment of loan instalments."

Mohammad Sirajul Islam, spokesperson for the Bangladesh Bank, made a similar comment.

"A final decision has not yet been made on whether the deadline will be extended or not."

Sirajul, also executive director of the central bank, further said, "In Wednesday's meeting, although bankers agreed not to extend the deadline, the Bangladesh Bank will take a final decision after analysing the economic situation and checking the balance sheets of the banks.

"There are two sides here. On the one hand, bankers say that they can no longer continue the facility. On the other hand, traders want the term of the facility to be extended. A decision will be taken after further reviewing the points of both sides.

Md Siddiqur Rahman, vice-president of the Federation of Bangladesh Chambers of Commerce and Industries, has demanded that the authorities extend the tenure of the facility of non-payment of loan instalments.

He told TBS, "The business situation has not yet returned to normal. In particular, the export sector is facing the challenges of the second wave of Covid-19.

"In such a situation, if the facility of non-payment of loan is cancelled, the number of defaulting borrowers will increase further."

He demanded that the facility should be given not in the next six months but throughout 2021.

The FBCCI vice-president suggested that the facility should be given to small borrowers instead of intentional and large loan defaulters.

Meanwhile, Association of Bankers' Bangladesh (ABB) General Secretary and Managing Director of City Bank Mashrur Arefin told TBS, "If normal repayment does not start, the loan growth will not happen. If there is no loan growth, the deposit rate will drop further.

"It's the time to return banks' funds to banks. Further extension of the payment holidays would have resulted in a major systemic collapse in portfolios of banks." 

Due to the Covid-19 pandemic, borrowers got the benefit of not repaying the loan instalments last year and there was a halt to debt classification as well. As a result, there were no new defaulters. But, the facility expired on 31 December last year.

Before the expiry of the tenure, the FBCCI had written to the central bank seeking an extension to the facility till the end of June this year.