New loan rescheduling scheme slowing bank’s recovery process
The new loan rescheduling scheme reportedly has started affecting banks ongoing loan recovery process. Though a clear statistical figure is yet to emerge, senior banking sources hinted at a visible slow down in regular repayment of loan installments to banks by many borrowers.
A senior central bank told The Daily Observer that the new system will not come into effect until a official circular has been issues. The finance ministry will have to inform Bangladesh Bank in writing about the new rules which will be then reviewed by the central bank before approval keeping in mind the best interest of the of the banking system.
"We are yet to get such official letter from the finance ministry," he said.
There is a growing fear that many good borrowers may now prefers to be 'good defaulters' as the finance minister has categorized them to avail of the benefit of new scheme. As a result, many have reportedly slowed down repaying installment while others are on waiting to see how the government is going to implement the new system.
Meanwhile, liquidity crisis is aggravating in the banking system. Bankers say they don't see any opportunity of recovering bigger chunk of the classified loans under the new rescheduling policy. Many banks are going to call money market to avoid immediate cash crisis. As a result, interest on call money has increased by at least four percent in some cases when the usual rate hovers around 5 percent.
Chairman of Association of Bankers, Bangladesh (ABB) and Managing Director of Dhaka Bank Sayd Mahbubur Rahman told The Daily Observer that banks fear slowdown in repayment of loan installments as many may surely try to benefit from the new system. It is rewarding at 9 percent to a defaulter when a regular borrower has to repay loan at 11 to 12 percent interest.
He believes it will take some time to see how the borrowers and the overall banking system will react to the new system. What is puzzling to him is how banks will be able to agree to nine percent interest for default loans when they can't collect deposits now at nine percent. "We are not getting deposits at single digit now, how we can agree to nine percent for default loans," he said.
Bankers said the lending margin is at around 5 percent now that includes provisioning against bad loans. They fear "banks will just fail to operate if deposit rates and lending rates become equal." Bankers say this is a critical policy issue to affect the entire banking sector and it needs to be widely discussed before unilaterally putting it into effect.
A senior Bangladesh Bank official said the picture is not clear to them either. They are also waiting for a clear picture based on feedback from individual banks. Mere announcement by the finance ministry is not enough.