2024-07-09 03:26:38
Bank sector’s main wound is defaulted loans. Even with various measures, the regulatory body is not able to heal this wound. On the contrary, it is increasing day by day. In such a situation, the central bank has issued a new policy to give ‘exit facility’ to defaulters. As a result, defaulters will get special benefits with only 10 percent down payment from now.
On Monday (July 8), the Banking Regulations and Policy Department of Bangladesh Bank issued a policy with this facility.
In the guidance, the central bank said, the business, industry or project of the borrower sometimes stops due to various reasons beyond its control or runs at a loss. In such a situation, collection of loan installments from the customer is hindered from the concerned business. Consequently, the loan is classified as default or adverse, which does not fall under the category of willful default. Due to the financial condition of the customer, there is a need to recover or adjust the debt under exit where the debt is not likely to be recovered.
Banks are following different procedures or criteria for exit as there is no specific policy regarding loan recovery or adjustment under exit. So a uniform policy is needed to provide these benefits. Considering this situation, the central bank has issued a policy to continue the liquidity flow of the bank through debt recovery and to reduce classified loans in the banking sector.
According to the policy, minimum criteria will be considered for granting exit. In accordance with this policy, banks will formulate their own exit policies, which will be approved by the bank’s board of directors. However, banks cannot add any flexible terms to their policies.
Regular loan exit facility can be provided in case of closure of project or business or closure of project or business by the borrower for the purpose of recovery of defaulted loans which are unlikely to be recovered in future.
A minimum 10% down payment of the loan balance should be paid in cash to apply for the exit facility. The bank will settle the application within 60 days of receiving the borrower’s application.
Exit facility should be approved by the board of directors of the bank. However, the management authority of the bank will have the power to grant exit facility for loans up to Tk 10 lakh.
Waiverable interest under this facility is to be transferred as separate blocked and interest kept as blocked after full repayment or adjustment will be treated as final waived.
The loan can be repaid in one or more installments under the exit facility. In case of repayment of loan in multiple installments, repayment schedule should be formulated based on banker-customer relationship. The repayment period will not normally exceed two years. However, the Board of Directors may extend the period by a maximum of one more year on reasonable grounds.
Special instructions
>> The pre-exit debt status will remain in place until the debt obligations of the individual, institution or company receiving the exit benefit are fully repaid. A defaulting borrower will be identified as a defaulter as per rules. Report to CIB regularly.
>> This benefit will not be treated as rescheduling or restructuring.
>> The individual, institution or company taking the exit facility will not get any new loan facility until the debt is fully paid or adjusted.
>> The instructions of the central bank will be followed in the recovery of the foreclosed debt under the exit facility.
>> Proper provision against loans should be maintained and collateral taken against loans cannot be released before loan adjustment. However, if the bank, customer and buyer are interested, the debt can be adjusted by selling the mortgaged property against the negotiable debt through a tripartite agreement.
>> If the customer fails to pay the dues after receiving the exit facility, the bank will take necessary legal action to recover the debt.
Banks based on Islamic Shariah can provide benefits to defaulters by following these principles.
According to the data of Bangladesh Bank, at the end of March 2024, the total amount of disbursed loans of the banking sector stood at Tk 16 lakh 40 thousand 855 crores. Out of this, 1 lakh 82 thousand 295 crores became default, which is 11.11 percent of the total disbursed loans. In one year defaulted loans increased by Tk 50 thousand 675 crore and in three months it increased by Tk 36 thousand 367 crore. A year ago in March 2023 it was 1 lakh 31 thousand 620 thousand crore and last December it was 1 lakh 45 thousand 633 crore.