Banks collecting loan instalments with interest despite BB order

Some banks have begun to collect loan repayments from borrowers with interest for April and May despite a suspension order from the Bangladesh Bank.

On May 3, the central bank brought great relief to borrowers by ordering banks to suspend collecting interest on all loans for the months of April and May.

During more than two months of general holidays, many people could not run businesses, earn money, or move around freely due to restrictions imposed to curb the spread of Covid-19.

Not all bank branches were open during that period of time.

Considering the situation, the central bank had ordered banks to transfer these two months' interest to a blocked account and not recover it until further notice.

However, from May 31, when the banks began operating normally, borrowers started to receive requests from lenders to pay the accumulated instalments. When borrowers went to pay the instalment, they noticed that the banks were charging interest as well.

State-owned Rupali Bank is one of those banks. A client of the bank told The Business Standard, "I have a personal loan with this lender. An official of the bank asked me for my loan instalments from my account for the last two months.

"However, when I failed to pay both months' accumulated instalments, the official deducted the instalment for one month with interest, similar to the months before March."

Md Obayed Ullah Al Masud, managing director and CEO of the Rupali Bank, said, "We have instructed all the branches to follow recent instructions. So there is no possibility of charging such interest. If it did occur, it was definitely caused by a software glitch."

However, this is not an isolated incident. Abbas Uddin, a client of the LankaBangla Finance Ltd, said he has a personal loan with this non-bank financial institution (NBFI) and he has to pay both April and May's instalments with interest.

Khurshed Alam, head of the LankaBangla's retail business, said, "The central bank issued the instruction to suspend interest for the clients of banks only, not for the NBFIs. So we cannot provide this facility to our personal loan and home loan borrowers."

"We have wilfully provided this facility to our credit cardholders only," he added.

To minimise the interest suspension burden on banks, Prime Minister Sheikh Hasina had declared Tk2,000 crore from budget allocation to provide as an interest subsidy.

Responding to a query, Bangladesh Bank Executive Director and spokesperson Md Serajul Islam said, "We are working on the interest subsidy. It is very likely that we will be able to issue an instruction in this regard before the end of this week."

He also said if banks had already collected interest from borrowers, the amount should go back to the customers' accounts.