The central bank has given a major concession (exit facility) to reduce the growing defaulted loans in the country’s banking sector and increase lending to the productive sector. As a result, customers will now be able to pay off the entire amount of bad or defaulted loans in one go and be free from liability.
In this regard, the previously strict conditions for waiving interest on bank loans and non-interest on customers’ loans have been relaxed. This initiative is mainly taken to reduce the banks’ non-performing loans and increase their ability to provide new loans.
Bangladesh Bank issued a notification in this regard on Monday and sent it to the chief executives of all scheduled banks in the country. Bankers say that as a result of this new decision, banks will be able to provide exit facilities to the defaulting borrowers, even if they want to, by collecting the original portion of the loan and waiving the entire interest. Until now, banks had little opportunity to provide this facility due to legal obligations.
The notification said that it is very important to increase the flow of credit to the productive sector in order to create employment and achieve sustainable economic growth. However, currently, the significant increase in the amount of non-performing loans in the banking sector is negatively affecting the quality of the banks’ assets, liquidity management and ability to provide new loans. In this situation, it is necessary to reduce the non-performing loans in the banking sector.
The central bank said that this one-time special exit facility will be provided to borrowers who, despite facing financial difficulties due to various reasons, have the ability to operate their businesses and are sincere in repaying their loans. This will reduce the defaulted loans of banks and increase their ability to provide new loans, which will play a positive role in the country’s production, investment and employment creation.
Big discount on interest waiver
According to the notification, banks’ bad and harmful loans classified as non-performing or defaulted loans will be covered under this facility till June 30 of this year. However, the approval of the board of directors of the concerned bank will be required to provide this facility and it will be determined based on the banker-customer relationship.