BB’s flexible loan repayment policy is sensible

Editorial Desk :
The Bangladesh Bank has relaxed its already flexible loan repayment policy, as they said the real income of borrowers has fallen due to the severe impacts of the prolonged Russia-Ukraine war. Now, borrowers will be allowed to avoid being classified as a defaulter if they clear 50 per cent of their instalments payable in the final quarter of 2022 instead of 75 per cent previously.
Insiders expressed their worries that the relaxed policy would deepen the liquidity stress in the banking sector as lenders will not get back the expected amount of funds from borrowers. Banks in Bangladesh are already struggling to mobilise deposits owing to the negative returns on savings for the higher inflation and erosion of confidence among savers after loan-related scams recently left them upset.
The relaxed policy will be applicable to borrowers who took term loans, whose repayment tenure is more than one year. The cost of industrial production has resurged in recent times due to the war since the conflict has driven up commodity prices in the global market. The latest extension came less than a week after the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country’s apex trade body, pressed for a relaxed loan classification policy until June next year. Borrowers enjoyed a full-year payment holiday throughout 2020 because of the coronavirus pandemic and could avoid slipping into the defaulter category by paying 15 per cent of the instalments payable for 2021.
The central bank discontinued the support from the beginning of 2022 as Covid-19 caseloads plummeted, paving the way for the economy to rebound strongly. Default loans in the banking sector may increase further once the relaxed facility is withdrawn. Bad loans hit a record Tk 134,396 crore in September when such loans accounted for 9.36 per cent of the total outstanding loans of Tk 1,436,200 crore in the banking industry.
The reasons for liquidity crisis in banks are looting of people’s money. This money is safely laundered out of the country.
Too many people are in financial difficulties in meeting their daily needs. So, the central bank’s policy of flexible loan repayment is sensible.