New BB circular misleading
Can defaulters get loan from stimulus package?
Financial sector experts said Bangladesh Bank's new circular which tacitly qualify defaulters to apply for loan from Tk 300 billion industrial stimulus packages is self defeating and also misleading as it may further raise the amount of non- performing loans.
The central bank before its latest circular had restricted defaulters from applying for loan from the stimulus package, but the new one will allow defaulters to avail of the loan. It is against natural justice as it will treat and defaulters and non-defaulters on equal footing. It breaks the existing discipline, they said.
As per the BB's latest circular issued on Sunday business houses can now apply for loans from the stimulus package without updating their internal credit risk rating systems (ICRRS) with banks.
The circular said as it is time consuming companies with their previous ratings with acceptable grades can apply for bank loans.
On this decision, economists, bankers and business houses having regular loan record have shown mixed reactions to the Daily Observer when they were asked to comment.
Prof Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), said with the change in the central bank's stance few defaulted entrepreneurs will get the opportunity to apply.
He said the BB's earlier decision was
appropriate for helping the genuine industries which have been affected by the coronavirus. But with the change of the policy decision government's real goal may remain elusive in some cases, he said.
Mirza ABM Azizul Islam, a former caretaker government adviser, said, "I have seen the new circular which does not say the defaulters can apply." He said it has just removed the barrier of mandatory requirement for ICRRS.
But he said loan defaulters can take the opportunity for applying but it is the banks' decision whether they will allow or not the applicants who are defaulted.
Ali Reza Mohammad Iftekhar, Chairman of the Association of Bankers Bangladesh (ABB) said, nowhere in the circular it has been said that the defaulters can apply. He said it is the responsibility of the Credit Information Bureau to see who is defaulter or not.
"But in the new rule everyone can apply, but we will check all applications and we will not provide loans to defaulters."
Mohd Khorshed Alam, Chairman of Little Group a textile manufacturing company, said habitual defaulters are usually politically influential. They will try to take out loans.
He said, "I have no defaulted loans and I applied for money but my bank is yet to respond."
He said good borrowers are deprived in some cases and defaulters use some loopholes in the banks' relations with them.
Many businesses take out loans from banks and instead of paying them back, they reschedule their loans repeatedly. These people will have to be kept outside the purview of the fund, he said.
After the declaration of Tk 300 billion stimulus loan package the BB said loan defaulters/ investment borrowers will not be eligible for loan and investment benefits under this package.
It further said in addition, if any loan and investment recipient organization has been refinanced more than three times after classifying any loan and investment; such loan and investment recipient body will not be eligible for loan and investment benefit under this loan package.