Banking experts are divided over the latest central bank circular centring the suspension of interest on all types of loans for the months of April and May.
Some tend to argue that the decision has come as a great relief for borrowers amid the ongoing 'general holidays' and that this will also help retain non-performing loans at a certain level.
But others do feel that the move will have a devastating impact on the key financial sector and take quite a long time to neutralise it.
On Sunday, the Bangladesh Bank (BB) asked all banks to suspend interest on all types of loans for the months of April and May.
It is estimated that the country's nearly 60 banks will aggregatively lose around Tk 140 billion and will affect their gross profit earnings.
The government will lose an estimated Tk 50 billion in taxes.
Mr. Helal Ahmed Chowdhury, former Pubali Bank managing director, said this is happening at a time when banks are adjusting with single-digit interest on loans.
"This also coincides with poor business growth amid the coronavirus pandemic," he cited.
Mr Chowdhury, who also served at the country's leading banking training institution, Bangladesh Institute of Bank Management (BIBM), said the government should offer the interest suspension facility only to the SMEs that are struggling amid the ongoing lockdown.
"True businesses deserve such a facility," he observed.
The former banker believes the government should think of the banking sector as it has also been going through a difficult time, in terms of higher NPLs.
"The central bank has given some policy support, but I think more support is needed to cushion the effect of interest waivers for two months," said Mr Chowdhury, who now serves as a general body member of the PKSF.
BRAC Bank chairman Dr Ahsan H Mansur said banks will need at least three years to recover the losses they have been incurring.
Big borrowers will get the benefits, he opined.
The latest action of the central bank is unique one as nowhere its counterparts have done so to combat the impact of the pandemic.
Other nations took decisions like payment of dividend and allowances during the pandemic.
Dr Mansur said banks are facing yet another pressure to meet the expenses pertaining to the COVID-19 allowances for their employees.
The BB circular has instructed the banks to send the accrued interest for the past two months to a blocked account at this stage.
Anis A Khan, a former CEO at the Mutual Trust Bank, said: "I think the PM will review the situation later with the Bangladesh Bank and the Ministry of Finance".
There could be multiple options: banks will absorb partially, clients will be charged a part and the government may take a portion as support/subsidy.
"But I don't think the full amount should be and will eventually be charged from a bank's profit and loan account," Mr Khan assumed.
He said banks cannot afford it and they still have to pay depositors their due interest.
Many of such deposited products are locked in at interest rates much higher than 9.0 per cent, as these were contracted in earlier periods.
Mr Khan, also an ex-chairman at the Association of Bankers Bangladesh, said: "I think sector-wise reviews will be made later to charge the accrued interest now kept in blocked accounts."
Two months' accrued interest is to be kept in a blocked account, meaning that clients won't be charged until further instructions, which is a big relief for them, he concluded.
