The news that some of the beneficiaries of the restructured loan facility offered by the central bank has defaulted on payment of the very first instalment of their outstanding loan should not surprise many. When the facility was put in place under the Restructured Loan Guideline in late 2015 after much cajoling by a section of large loan defaulters, many had, however, predicted such an outcome. The facility was extended to selected borrowers having bank loans above Tk 5.0 billion each.
According to a recent newspaper report, some recipients of the facility have sought fresh loans despite the fact that the guideline does not have any such provision. What is more interesting is that some bank loan defaulters, who are not eligible for such facility, have taken recourse to legal measures seeking the restructured loan facility. They have reportedly filed as many as 80 writ petitions with the higher courts.
Back in 2014 a big business house known for dubious reputation as a borrower had approached the central bank with the proposal of granting the loan structuring facility. Some other big bank loan defaulters followed suit. Coming under pressure from powerful quarters, a reluctant central bank in 2015 granted the facility to 11 out of 20 business groups that had applied for it under a new guideline. Under the facility loans worth Tk 152.18 billion were restructured. Most part of the amount belonged to the state-owned banks. Many experts, however, had opposed the move fearing repetition of the default culture here also.
The scepticism about the success of the scheme is proving to be true. The fact remains that the big defaulters had no option other than devising some non-conventional means to regularise their classified loans. They had already exhausted all the means available for delaying repayment of the overdue loans. The loan restructuring facility was chosen as the last resort. The Bangladesh Bank was reluctant since it was aware of the developments involving the restructured loans in neighbouring India. Indian banks are having a very unpleasant experience with the restructured loans. The experience of Bangladeshi banks is unlikely to be different.
Seeking he restructured loan facility for settling their overdue loans was the last ditch effort on the part of delinquent borrowers. In the event of failure to adhere to the relevant guideline would expose the borrowers concerned to legal actions by the banks under the bankruptcy law of the land. It remains to be seen what the banks do in the event of failure to repay instalments by the borrowers concerned. It will also be interesting to watch what mechanism the borrowers --a few borrowers are quite influential having strong political connections-- devise to stave off the banks' extreme actions.
The default culture in the banking industry has reached its peak and the introduction of the restructured loan facility is one of its manifestations. Deliberate indulgence has helped the culture to flourish and become all-engulfing. Now over 10 per cent of the outstanding loans in the banking system are non-performing. That is what is official statistics says. The actual size of the soured assets would be far bigger. The high lending rate has nothing to do with the existence of high level of classified loans. Some people tend to believe that a section of borrowers would not repay even interest-free loans.