The Bangladesh Bank's (BB) decision to offer concessions to loan defaulters and good borrowers to reduce the substantial amount of non-performing loans (NPL) has received mixed reaction from economists, bankers and businesspeople.
The central bank issued a circular on Thursday, asking the banks to provide minimum 10 per cent rebate on the total amount of interest or profit of the good borrowers for the last 12 months in every September.
In another circular, the BB offered a special facility to loan defaulters, allowing them to reschedule loans by paying 2.0 per cent down payment repay the loans within a maximum period of 10 years.
Dr Zahid Hossain, the World Bank (WB) Lead Economist for Dhaka office, welcomed the BB decision for giving incentives to good borrowers, saying that the initiatives will help reduce new loan default.
"Undertaking initiatives for providing rebate to the good borrowers is a positive step. But positive result of the initiatives will depend on its proper implementation."
He urged the authorities concerned to step up monitoring activities for ensuring proper execution of the move.
Referring to the special facilities for loan defaulters, the WB economist said the initiatives are also good for reducing the existing huge amount of NPL. But the government will have to clear many issues to get positive result from these.
"The authorities concerned will have to reform the existing legal framework for the loan defaulters," he added.
In his reaction, BSS reported, Professor Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), underscored the need for reforming the existing laws to get medium- and long-term result from the initiatives.
"The initiatives are expected to offset short-term liquidity crisis of the banks. But there will be no long-term effects, if we can't reform the existing laws," he opined.
Welcoming the central bank move, Humayun Rashid, President of the International Business Forum of Bangladesh (IBFB), said the initiatives will help the good borrowers to run their business smoothly.
"It's a good decision. But, the authorities concerned will have to increase their monitoring for its proper implementation. Simultaneously, they will have to be more careful about the intentional loan defaulters," he added.
Talking about the issue, Syed Mahbubur Rahman, President of the Association of Bankers, Bangladesh (ABB) and Managing Director of the Dhaka Bank Limited, said banks can provide more facilities to the unintentional loan defaulters.
"But, we will be more careful about the intentional loan defaulters," he added.