In a reversal of its stance, Bangladesh Bank yesterday paved the way for 11 large business groups to reschedule their loans even though they restructured their loans four years ago on condition of regular repayments.

The decision came at a meeting of the central bank’s Board of Directors. Earlier on July 8, Sonali Bank wrote to the BB, requesting a loan of Beximco Ltd be rescheduled.

Yesterday’s meeting approved in principle the rescheduling of the restructured loans.

Under a special package, the 11 businesses committed to meet a number of conditions in 2015 to restructure their loans amounting to Tk 15,180 crore.

One of the conditions was that the borrowers would be marked defaulters if they failed to pay two consecutive instalments. If that happened, the benefit would be cancelled and they would be barred from any loan rescheduling benefit in future.

The central bank had said banks could sue borrowers under the Bankruptcy Act 1997 if they failed to pay back.

At yesterday’s meeting, Beximco was allowed to reschedule its loan of Tk 430.05 crore. It had six years to repay the loan but now it has 12 years to do so.

Since the precedence has already been set, the 10 other business groups could now seek to reschedule their loans.

“This time the rescheduling benefit will be given on a case-by-case basis with prior approval from the central bank,” a top BB official told The Daily Star.

A source in the central bank board, wishing not to be named, said it might not consider approving the rescheduling of loans of groups that were not performing well at all.

However, a central bank official said since the precedence has been set through the case of Beximco, the other 10 were most likely to get it eventually.

Of the 11 business groups, five — AnonTex, SA Group, MR Group, Rising Steel, and Keya Group — have become defaulters again. Most of the 11 groups had repeatedly been defaulting on loans.

Ratanpur Group failed to pay 29 instalments but it got the loan defaulter tag off by securing an order from the High Court.

In October, Ratanpur Group sought rescheduling of loans after one of its subsidiaries, Modern Steel Mills, failed to pay. The central bank had rejected the appeal but now, thanks to the new example set, it might get another chance to reschedule the loan.

According to a central bank paper presented at yesterday’s meeting, the borrowers already defaulted on or were on the verge of defaulting on a large amount of loans restructured in 2015.

In August 2014, Salman F Rahman, vice-chairman of Beximco Group, informed the central bank governor in a letter that Beximco Ltd was in a liquidity crisis dire enough to cause it to collapse.

He blamed the situation on two factors: politically motivated credit restrictions on the group between 2001 and 2008, and repayment of Tk 800 crore in bank loans in the previous three years. Economic disruptions during the prolonged spell of blockades and shutdowns in 2013-14 were also blamed.

The central bank had framed the 2015 loan restructuring policy in response to the letter, despite criticism from different corners of the financial sector.

Khondkar Ibrahim Khaled, a former deputy governor of the central bank, said, “The banking sector is already replete with weak corporate governance. With the latest central bank decision, discipline in banks will totally collapse.”

Beximco Group, which alone accounted for one-third of the total restructured loan amount, also got a special benefit from the central bank in April last year. Bangladesh Bank allowed it to pay instalments in such a way that it had to pay smaller amounts in the first couple of years.

Salehuddin Ahmed, a former governor of the central bank, said hardly any bank or client would pay heed to the central bank as it revises decisions frequently to the benefit of the delinquent borrowers.

“The central bank issued the restructuring policy after analysing the financial health of banks in details, but the latest decision will send a wrong signal to the financial sector,” he said.

As of March this year, the total amount of restructured loans stood at Tk 17,225 crore, up 15.25 percent from that four years ago, as most of the 11 borrowers did not pay their instalments on time.

Source: The Daily Star.