Bangladesh Bank grants special restructuring to 280 defaulter firms

Business owners who have defaulted on bank loans are once again being given the chance to restructure their debts. This opportunity is being granted under the special authority of Bangladesh Bank.

The central bank has already decided to restructure the defaulted loans of around 280 organisation. Over a thousand more applications for loan restructuring are still awaiting approval.

Under existing policy, defaulter organisations are unable to renew their loans by depositing the required amount. For this reason, under a special concession, companies are being given the chance to restructure their loans.

Only those with outstanding loans exceeding Tk 500 million are eligible for this facility. At the beginning of this year, Bangladesh Bank formed a selection committee to provide this benefit.

According to Bangladesh Bank sources, many of the businesses whose loans are now being restructured had been shut down during the tenure of the now-ousted Awami League government. The list includes businesses owned by top to grassroots-level leaders of the Bangladesh Nationalist Party (BNP). Some companies struggled during the Covid-19 pandemic and the dollar crisis. Again, some of the organisations getting benefits have faced allegations of loan-related irregularities.

It was also learned that some of the organisations now receiving loan restructuring benefits had previously taken advantage of similar facilities offered by Bangladesh Bank. However, the exact total amount of loans approved for restructuring has not been confirmed.

The central bank’s decision will only be implemented once the borrowers deposit the specified amount, after which the respective banks will enforce the restructuring. Some borrowers who are to participate in the elections have already renewed their loans.

Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan told Prothom Alo: “We have sent letters to the banks to provide special policy assistance to 280 organisations. Companies affected by Covid-19, the dollar price surge, and political reasons are being granted this facility. More applications are still under review, which will help revive business activities.”

According to central bank sources, Bangladesh Bank has decided to restructure nearly Tk 30 billion in loans of four companies under the Energypac Group. The group has started the process of regularising loans held in 28 banks and financial institutions.

Humayun Rashid, Managing Director of Energypac Power Generation, told Prothom Alo: “Our loans went bad due to Covid-19, the dollar crisis, and unpaid bills from the government. The government withheld our payments for six years. Now Bangladesh Bank has given us a special opportunity for restructuring.”

“We have exported transformers to Nepal and received large purchase orders. With the dollar’s crisis easing, we are seeing signs of business improvement,” he added.

Apart from Energypac, the Buildtrade Group owned by Enayetur Rahman Bappy and its affiliated companies have received restructuring approval for loans worth nearly Tk 40 billion.

In addition, the loan of his Virgo Media (Channel Nine) has also been approved for restructuring. Buildtrade’s loan is with AB Bank, while Virgo Media’s loan is with Rupali Bank.

Other recipients include BNP Treasurer M Rashiduzzaman Millat’s Sourab Group, Rajshahi-based Ershad Group, Blue Planet Group’s Palace Resort in Habiganj (owned by businessman Arifur Rahman), Sky Capital, and Badar Spinning Mills.

The list also features Western Engineering, Bengal Group’s Bengal Plastic, Abdul Monem Group, Orion Group, Deshbandhu Group, Opex Sinha, and Tanaka Group.

Additionally, Gazi Group, whose property was damaged in a fire during last year’s August mass uprising that toppled the government, has also been granted the facility.

Other companies in the list include Dandy Dyeing Limited (owned by the Zia family), Rising Steel (owned by BNP Chairperson’s adviser Aslam Chowdhury), Sabab Fabrics (owned by Sylhet BNP leader Khondkar Abdul Muktadir), One Denim (owned by Giasuddin Al Mamun), Fair Electronics, Ifad Group, Ambient Steel (BD), GPH Ispat, Prime Group, Anwar Group, Silkways Group, Tanaka Group, Diamond Spinning Mills, Mim Group (Alema Textile), SMA Group (AA Knit Spin), BUC Agro, Bling Leather Products, Apex Weaving, and Ankur Specialized Cold Storage.

However, not all companies within these groups are defaulters — in some cases, only certain sister concerns have defaulted. Bangladesh Bank has issued letters, in the names of the respective organisations, to the lending banks and financial institutions, instructing them to provide loan restructuring facilities.

Under the usual rules, a defaulted loan can be renewed by making a one-time deposit of at least 4.5 per cent of the outstanding amount, with up to one year’s grace period and repayment over seven years.

Under this special concession, however, defaulter companies are being allowed repayment over 5 to 15 years, with just a 1 per cent one-time deposit (down payment), and a grace period of up to three years before repayment begins.

Banking insiders say this special facility has led some otherwise sound businesses to become irregular in loan repayments, disrupting banks’ liquidity management and pushing interest rates higher.

On the other hand, some bankers argue that many beneficiaries have been chronic defaulters for years with no repayments at all. This restructuring allows banks to recover at least a portion of the money upfront, improving liquidity and re-establishing contact with borrowers after years.

Association of Bankers, Bangladesh (ABB) Treasurer and Dhaka Bank Managing Director Sheikh Mohammad Maroof told Prothom Alo: “For genuinely affected companies like Gazi Group, this facility makes sense. But granting it for older issues like Covid-19 and the dollar price hike wasn’t necessary. Also, a repayment term of 15 years could hurt banks’ liquidity management.”

In 2015, citing political unrest, Bangladesh Bank had similarly granted special restructuring after an appeal from Salman F Rahman, then Prime Minister Sheikh Hasina’s private sector adviser.

At that time, 11 industrial groups received approval to restructure Tk 150 billion in loans. Beneficiaries included Beximco Group, Orion Group, Jamuna Group, Sikder Group, Keya Group, AnonTex, Ratanpur Group, SA Group, BR Spinning, Rising Group, and Abdul Monem. Several of those companies have again been granted restructuring this time.

Meanwhile, a large portion of bank loans distributed during the now-ousted Awami League government’s tenure has turned into defaults — particularly those given to businesspeople close to top leaders. The current economic downturn has also caused many loans to sour. New policies have further contributed to the rise in defaults.

According to Bangladesh Bank data, as of last June, defaulted loans in the banking sector had risen to Tk 5.3 trillion (Tk 530,428 crore) which is about 27 per cent of all outstanding loans. That means more than a quarter of the banking sector’s total loans are now in default.

At the end of March, defaults stood at Tk 4.2 trillion (Tk 420,334 crore), with a rate of 24.13 per cent. In June 2024, the figure was Tk 2.11 trillion ( Tk 211,391 crore), meaning defaults rose by Tk 3.19 trillion (Tk 319,037 crore) in just one year.

Bankers say special restructuring measures will temporarily reduce the volume of defaults. However, unless economic activity revives, these loans may again go bad. Creating a healthy business environment is now essential.

Former ABB Chairman and Mutual Trust Bank Managing Director Syed Mahbubur Rahman told Prothom Alo: “In the past, these facilities were granted on political considerations. This time they are being given for logical reasons, so anyone can apply. Bangladesh Bank is conducting various audits, evaluations, and inspections before approving restructuring. Final implementation is left to the banks, which is good. However, the long repayment terms still raise concerns about recovery.”

*This report, originally published in Prothom Alo print edition, has been rewritten in English by Farjana Liakat