In the Bangladesh Bank's circular published after five working days of the new governor's taking the office, the entire power to decide what benefits will be given to defaulted loans has been handed over to the bank's board of directors. As a result, the bank owners will now decide what benefits they will give to the defaulters. Earlier, regularisation of special loans facility required the approval of the Central Bank, which was approved by the Governor himself.
Most of the big defaulters in Bangladesh are bank owners. As a result, the issue of determining the facilities to be given to the defaulters has been entrusted to the hands of the defaulters. It reminds us of the famous Bengali proverb pf putting the fox in charge of the hens. This policy of Bangladesh Bank will not bring stability to the financial sector. Concerned people believe that it will put the banking sector at serious risk.
The new governor of Bangladesh Bank made this announcement at a time when the amount of bad loans of Bangladesh has crossed Tk 1 trillion (1 lac 13,000 crores to be precise). When Awami League came to power in 2009, the amount of defaulted loans was Tk 220 billion.
Former governor Fazle Kabir offered concessions in loan repayment to the businessmen due to losses resulting from the Covid pandemic. The businessmen remained good clients for two years despite defaulting on the loan. The new governor continued the same irregularities.
As former governor of Bangladesh Bank, Salahuddin Ahmed, said those who are good clients and small and medium entrepreneurs can be given this opportunity. But trying to keep big borrowers off the list officially with big benefits will do no good. Rather it will discourage good clients.
During the tenure of the previous governor, there was a spate of scams in the banking and financial sector, but he did not take any action. Rather, evidence has been found that several former officials of the central bank were involved in those scams. People expected the new governor to take strong steps to restore order in the banking sector and recover defaulted loans. But the latest circular of Bangladesh Bank conveyed opposite message.