The central bank Sunday brought great relief to borrowers as it ordered banks to suspend taking interest on all types of loans for two months till May.
But bankers were dumbfounded by the circular, saying the move will turn the banks into loss-making concerns, hampering their international business and hurting depositors' confidence.
On the other hand, the business community said banks should not be concerned about this as this is not a waiver; it is a suspension of interest for two months only.
An economist, however, said the facility should not be available to all as everybody has not been equally affected by the Covid-19 pandemic.
The decision has created a lot of commotion in the banking sector since the issue of the circular by Bangladesh Bank yesterday evening. This has puzzled banks as they now have to reverse the interests collected in April to keep those in the blocked account.
"It is the final nail in the coffin for banks," said a senior banker, adding, "The move will discourage banks from doing business and taking deposits as well."
His bank has to reverse over Tk200 crore in operating profits from its books of accounts.
Another top banker said they are already badly affected with the impacts of the pandemic and capping of the lending rate.
His bank has over Tk25,000 crore in loans and advances in the economy and they will miss out over Tk400 crore as interest from those loans.
"We will not get anything in these two months, but we will have to pay our depositors," he said, calling the central bank move as a "disaster".
"If we make losses, foreign banks will not do business with us and will not accept our letters of credit," he said.
Four other bankers also echoed this opinion. They fear depositors may lose trust on loss-making banks.
"We are not clear what the central bank wants to say about the transfer of applicable interest to a blocked account," said Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh and managing director of Eastern Bank.
He said the central bank has said "till Further notice," but banks need a clarification on this issue.
"We will discuss the matter with the Bangladesh Bank on Monday. Then we can comment on how it will impact the banks' business," he said.
Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), does not think that banks will sink just for missing two month's interest.
"This is not a waiver, banks can get it [interest] back once normalcy returns," Fahim told The Business Standard.
He asked how businesses will repay banks when there is no cash flow.
Fahim said a bank's income does not depend only on interest – there are numerous fees and charges.
Dr Fahmida Khatun, executive director of Centre for Policy Dialogue (CPD), said the world is going through an extraordinary situation and many businesses are affected.
"But the facility should not be given to all. A credit card user or an auto loan borrower does not need it. It should be well thought out," said Fahmida.
The government could have differentiated the sectors that are badly affected by the pandemic before offering the interest benefits on loans, she added.
Md Serajul Islam, executive director and spokesperson of the BB said, the central bank has issued this circular on the basis of government's interest for a greater good.
Earlier in April, the central bank had asked banks not to classify any borrower as a defaulter till June 30. Then the government announced a number of packages to support businesses that have been impacted by the pandemic.
The Bangladesh Bank has also given banks a big space by reducing CRR and repo rate and forming low cost funds as refinance schemes.