New BB loan restructuring policy

Aimed at banks to get a repayment on big borrowers worth more than Tk. 500 crore, the new loan restructuring policy being introduced by the central bank, allows for repayment over a 12-year period. The downside is that shareholders of such companies will be deprived of any dividend for the first three years. Companies must set aside an amount equivalent to 2 per cent of their income to qualify for the loan restructuring offer. The new policy is being touted as a necessary measure to help bank clients who failed to repay loans on a timely basis due to political turmoil and other unavoidable circumstances. What economists fear is that such a policy coming into effect without addressing the root cause requiring restructuring and putting in place appropriate reforms may expose it to abuse and solvency of the banks to a new risk.

Whilst central bank officials opine that the policy will assist in returning profitability to banks by bringing about a reduction on classified loans, where are the measures that should be tackling defaulters to recover untold millions that have been “borrowed” and not paid back in the various scams that rocked the financial system in 2012? Public money has been siphoned off and faith in financial governance has been shaken through these incidences. Now we are looking at ways to reduce the portfolio of classified loans by giving even more time instead of taking concrete measures to rekindle public confidence in the banking sector.