Five state-owned commercial banks have received nearly 80 percent of loan rescheduling applications as defaulters rush to regularise their credits on easy terms under a special facility extended by the central bank.
Around 4,000 loan rescheduling proposals have been submitted as of yesterday, the last day for sending in the applications as per the latest deadline, according to the officials of the banks.
The number of applications may go up further as the High Court yesterday extended the deadline by a month.
Of the lenders, five state-run commercial banks Sonali, Janata, BASIC, Agrani and Rupali received more than 3,000 proposals.
While the state-run banks were flooded with the rescheduling applications, the picture was opposite for private banks as they were not much interested about offering the wholesale facility to the defaulters.
“We have got many applications on political consideration. If approved, the rescheduling of loans will bring down the non-performing loans (NPLs),” said a senior official of Janata Bank.
The bank received more than 700 proposals involving around Tk 10,000 crore, including Tk 3,000 crore for AnonTex Group.
Md Abdus Salam Azad, managing director of Janata Bank, neither received phone calls nor responded to text messages of this correspondent.
Troubled BASIC Bank received more than 500 applications involving loans amounting to Tk 2,300 crore, an official of the bank said.
On May 16 this year, the Bangladesh Bank issued a circular allowing borrowers who got defaulted by December last year to reschedule their loans for 10 years, by giving a down payment of only 2 percent instead of the existing at least 10 percent.
The BB also capped the maximum interest rate at 9 percent, down from the existing rate of 10-14 percent.
Also, based on a bank’s relationship with a client, the accrued interest on the defaulted loan can be waived, leaving the defaulter to pay only the principal amount with the new interest rate of 9 percent.
“We receive rescheduling applications from our clients regularly. We are cautious and we will not extend the facility to all,” said Syed Mahbubur Rahman, managing director of Dhaka Bank, a private commercial lender.
Rahman, however, said the move would help banks reduce NPLs and book higher income.
“We have received some rescheduling applications, but the number is not big,” said Shafiqul Alam, managing director of Jamuna Bank.
Now banks will scrutinise the applications and go for the rescheduling with the approval of the boards.
Bankers say they will not need to take prior approval from the central bank if they stick to the conditions stated in the circular.
The central bank had extended similar facilities in January 2015 but the move did not yield any success. At that time, 11 large business groups got their loans of nearly Tk 15,000 crore restructured on relaxed terms.
But the amount swelled to Tk 17,103 crore as repayments were not made, according to a recent BB document.
As of June, the banking sector’s total NPL stood at Tk 112,425 crore, which is 11.69 percent of the total outstanding loans.
The amount would be nearly Tk 200,000 crore if the delinquent loans of 675 large borrowers—who obtained stay order from the High Court on their default status—are taken into account.
State banks account for almost half of the total NPLs, a result of directed lending, poor risk management, and weak corporate governance and prudential oversight, said the World Bank in its latest Bangladesh Development Update.
There are concerns that the reported NPLs are underestimated considering significant under-provisioning, regulatory forbearance and legal loopholes, it said. Cases involving Tk 79,242 crore were pending at courts as of January 10.
The actual size of bad loans in Bangladesh is more than double the officially recognised figure, said the International Monetary Fund recently.