Will loan defaulters become good?

A big thanks to Bangladesh Bank for its circular providing special facilities to loan defaulters. The circular was prepared in a five-star hotel where the central bank actually had no role to play. This was later written in the bank and financial institution division of the finance ministry. The draft was then sent on to the BB and they reportedly made slight changes to it.

We will then congratulate those who remained defaulters year after year. Their patience has been rewarded. The government has given them huge concessions. Rather than being castigated or punished, the defaulters were rewarded. They are now allowed to pay off their loans with a 2 per cent down payment on the loan amount and with 9 per cent interest over a span of 10 years. They will also qualify to receive fresh loans, too.

The government has recognised the good borrowers too. Good borrowers will get 10 per cent rebate from the total interests on their loans.

The government also deserves thanks. It was learnt that the loan defaulters will receive rewards as in the past. Every time the defaulters were rewarded, the government was criticised too. As a result, the regular and good borrowers were discouraged to repay their loans. That is also unethical. The government is facilitating the owners of black money to whiten their money as it is providing various facilities to defaulters. This time the government announced rewards for good borrowers.

There is no doubt that the government has given special attention to good borrowers to shake off the criticism for providing facilities to defaulters.

The controllers of the capital market will also be thanked. The market has been at a low for long. The stock market has been bearish, though at time lifted up by force. There is a crisis of funds. There is also a crisis of confidence. The government on Thursday issued a separate circular on the capital market. In the circular, the ceiling of bank investments in the share market has been raised. The liquidity crisis in the capital market will decrease and the market will be boosted. But the question remains as to how far will the crisis of confidence be resolved.

It is expected that the circular of Bangladesh Bank will play a special role in the economy and defaulters will become good. They will repay their loans regularly. Investment and employment will increase. And people’s income will increase. Moreover, the crisis of investment will be solved and the money laundering will be reduced. Nobody will divert loans to other sectors.

Special facilities were given to defaulters in 2015. Loans of 11 companies above Tk 5 billion were restructured. The condition was that they repay their loans regularly. But the reality is, only two companies paid their installments. There is no instance in Bangladesh that defaulters become good after receiving special facilities. Who is to guarantee this will not be repeated?

It is more profitable in Bangladesh to be a bad borrower than a good one. One can live a life of luxury by laundering money or using it for purposes other than for which it was borrowed. We have to wait and see whether the new policy will increase their luxury or not. There is also doubt as to whether the government has issued the circular for the sake of the economy or for the business interests of a handful of businessmen.

* This news analysis, originally published in Prothom Alo print edition, has been rewritten in English by Rabiul Islam