Interest waiver on loans

IN a central bank report to the Executive Committee of National Economic Council (ECNEC) it is revealed that Tk 3,685 crore worth of interest had been waived on outstanding loans during last eight years. In the period under review, a Jammat-BNP four-party alliance government and a caretaker government were in power. As many as 693 borrowers including former MPs and influential businessmen got the massive waiver from nine state-owned banks and financial institutions.
We are not aware of whether the then central bank governor/s, and chiefs of banks and financial institutions were consulted, and if they were, what views they had aired about the extraordinary gesture of accommodation. Suffice it to say though, that the two governments, one political and another apolitcal, decided in favour of waiving accumulated interests. And it so happens that the caretaker government waived more than the erstwhile alliance government which also did it mostly in the terminal year of its tenure.
When default culture is entrenched in the country and defiant of government efforts to recover outstanding loans impacting severely on the national economy, anything that negates financial discipline and loosens the grip over loan default is bound to be self-defeating. As it is, staggered rescheduling of loans topped off by scaling down of the down payment requirement have been the signature of consideration shown to loan defaulters. Now comes the waiver of interests. This is making a discrimination between genuine borrowers who are apt to repay and those who try to wriggle out of obligations through lobbying. More to the point, how does a government insist on a certain category of borrowers with any moral force to repay loans while it has clearly shown leniency to handpicked class of borrowers. Basically, it is patently opposed to any serious loan recovery drive. At best, in the case of borrowers having genuine difficulties in servicing debts, the banks could move to reschedule their loans and not write off accumulated interests which in two cases amounted to as much as Tk 148cr and Tk 103cr respectively.
An 'exit policy', we endorse the suggestion of Bangladesh Bank, should be carefully designed for the state-owned banks and financial institutions by the central bank and the finance ministry, and not dictated to.