The Bangladesh Bank said Thursday that it would evaluate the proposal of the Association of Bankers Bangladesh to allow them to write-off loans immediately after they become classified as bad or loss instead of waiting for three years.
Economists opposed ABB proposal.
They said that the proposal would give further relief to the defaulters and increase default loans.
At June end, the country’s classified loans stood at Tk 1,12,425 crore, of which 87.11 per cent or Tk 97,932.28 crore was bad loan.
The central bank gave its decision at a meeting with the bankers held at the Bangladesh Bank Bhaban in the capital with BB governor Fazle Kabir in the chair.
Deputy Governors SM Moniruzzaman and Ahmed Jamal, and ABB chairman Syed Mahbubur Rahman attended the meeting among others.
At the meeting, the managing directors and chief executives of banks proposed to allow them to write-off bad loans immediately keeping the provision and filing cases against the defaulters.
Under the existing policy banks are allowed to write-off bad loans after three years, keeping 100 per cent provision against the loans as well as filing cases against the defaulters.
Earlier, the banks could write-off bad loans immediately after provision and filing the cases.
ABB chairman Mahbub told New Age there could be no meaning in waiting for three-years to write-off bad loans after keeping adequate provision and filing cases.
He said that writing-off bad loans from the balance sheet would help bringing down nonperforming loans.
In reply, the BB informed the bankers that it would assess the proposal and examine the practices followed in other countries in writing-off bad loans, a BB official told New Age after the meeting.
Even if the bankers were allowed to write-off bad loans, the central bank might impose some conditions on the banks for writing-off bad loans, officials said.
Asked about the matter, former caretaker government adviser and economist AB Mirza Azizul Islam told New Age, ‘It would provide another relief to the loan defaulters and help them to show clean accounts.’
Under an especial loan rescheduling policy of the BB, issued on May 16, defaulters were allowed to reschedule defaulted loans for 10 years on two per cent down payment, much lower than the existing rescheduling policy that requires 15 per cent down payment.
Instead of reducing the defaulted loans, if banks were allowed to write-off loans under the proposed policy, it would help further increase default loans, Mirza Aziz said.
If the policy is revised, the bank owners would get the opportunity of taking higher dividends from banks by showing increased operating profits, he said.
The managing director and chief executive officers of banks also raised the stamp duty issue that was placed by the Authorised Dealers’ Forum at Wednesday’s meeting with the BB
They requested the BB to reconsider a regulatory instruction that made payment of 0.2 per cent stamp duty mandatory on bills of exchange against exports.
But the BB told the bankers that the issue was related to taxation and the National Board of Revenue was the sole authority about it.
The ABB chairman also said that, among others, they requested the central bank to reduce the mandatory cash reserve ratio and statutory liquidity ratio for offshore banking units and raising the home loan ceiling to Tk two crore from Tk one crore.
News Courtesy: www.newagebd.net