• Friday, Feb 03, 2023
  • Last Update : 10:24 am

Businesses up in arms over BB’s decision to not extend loan moratorium facility

  • Published at 06:06 pm February 4th, 2021
Bangladesh Bank central bank head office
The Bangladesh Bank headquarters in Motijheel Mahmud Hossain Opu/Dhaka Tribune

However, the borrowers of term loans will get more time to pay their instalments

The business community has called for an extension to the loan moratorium facility to until June to avert a shortfall of working capital and to bounce back from the economic fallout of the pandemic.  

Earlier this week, the Bangladesh Bank announced that the loan moratorium facility on the repayment of loan instalments announced back in March last year would not be extended beyond December 2020.

However, the borrowers of term loans will get more time to pay their instalments and banks will be able to extend the tenure of regular term loans by a maximum of 50 per cent of the remaining payment period from January this year based on bank-customer relationship.

There is a strong need for extension of the moratorium period as the economy is at the early stages of recovery, Abul Kasem Khan, managing director of AK Khan Telecom. 

“We cannot ascertain when the full recovery will be. There are many factors involved in economic recovery. Global economies are at recessions and we cannot expect a turnaround until our trading partners return to health.” 

Financial and policy support was given for the sustainability of business and to retain the trade. 

If the support is withdrawn amid the pandemic, the business community would fall back into trouble, said Khan, also a former president of the Dhaka Chamber of Commerce and Industry. 

“Given the present state of the global and domestic economy, the government should not unplug the facilities and support. Rather, those should be extended for the rest of the fiscal year.” 

On the other hand, those who are capable of paying the instalments should pay.

“But those who are not in a state to pay deserve the extension for a smooth recovery. The bank-client relations can be a tool,” Khan added.

However, the central bank said there is no need for an extension.  

“From the statistical perspective, we think there is no logic for extending the moratorium facilities,” said Md. Serajul Islam, BB spokesperson. 

About Tk 255,387 crore was disbursed amid the pandemic through aid packages, which is about 25 per cent of last year’s loans. 

“This means, 75 per cent did not take the facilities, while those who took already paid Tk 36,711 crore. If the impact of covid was so severe, we would have disbursed more.”

Those who took loans were eligible and they can pay. 

“So, it is not logical to extend the time for non-eligible people. We cannot provide opportunities to the bad customers,” he added. 

However, trade leaders denied it and they said the public health crisis is still hurting the businesses. 

Economic recovery is not visible as the country’s imports are witnessing negative growth, while the exports earning are lower too.

During the July-November period of 2020, the country’s import declined about 9 per cent to $20 billion. 

Meanwhile, exports earnings of the country declined by 1 per cent to $22.67 billion during the July-January period of the fiscal year.

“Coronavirus is not over. The impact of Covid-19 pandemic would be visible in 2021. So, why does the facility end in 2020?” Rizwan Rahman, president of Dhaka Chamber of Commerce and Industry (DCCI) told Dhaka Tribune. 

The facilities should continue for 2021. 

“If it is not possible, then extend it to June, the end of fiscal 2020-21.”

In making the government support more inclusive, Rahman suggested providing the facilities based on the business types such as large, medium, small and cottage and micro.   

For cottage and micro-entrepreneurs, this opportunity should be extended to December, and for SMEs to June. 

Besides, the government can extend the moratorium facilities by at least for three months for the large industries.

“Banks have to play an active role to this end for the greater interest of the industry as their business will depend on the recovery of entrepreneurs as well as the economy,” he added.        

However, economists said the extension should not be indiscriminate; rather, it may be only for the truly affected business people. 

“It should not be right to open the facility for all indiscriminately. This can be only for those who are really affected by the unprecedented impact of Covid-19,” said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office. 

Offering the facilities will have an impact on banks and it may jeopardise the depositors’ money as the willful defaulters would try to take advantage of it.   

On top of that, business people also said if time is not extended it would increase default loans and hit working capital.        

“The extension of timeframe to pay instalment is very crucial as the second wave of Covid-19 pandemic is still hitting the country’s exports,” said Abdus Salam Murshedy, president of the Exporters Association of Bangladesh (EAB). 

If it is not extended, there will be a sharp rise in default loans due to non-payment of instalment.

Exports are going through a negative trend. 

A huge amount of money was stuck due to the order cancellation and delayed payment of dues, while the second wave of coronavirus posed new threats as exporters are witnessing further hold on orders, he said. 

Exports earnings in January were 5 per cent lower at $3.43 billion from a year earlier. 

To avert the untoward incident of default loans and working capital, the central bank should consider it, said Murshedy, also a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).  

In addition, the owners have to pay bonus and salaries for the upcoming Eid-ul-Fitr, 

“I think there is no need to extend the moratorium but banks should be empowered and given the liberty so that they can extend it based on bank-client relationship,” said Ahsan H Mansur, chairman of Brac Bank.   

Some borrowers are in trouble, so the BB and the banks have to be sensitive towards the affected clients.

“But the able borrowers and willful defaulters should not be given the leeway,” said Mansur, also the executive director of the Policy Research Institute.

He also urged the government to increase the timeframe to repay the loans taken from different packages.

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