Businesses seek loan moratorium till December

Businesses have sought another extension to the loan moratorium facility until December this year as, they said, they have to pay extra money for imports in the wake of rising commodity prices in the world market due to the Russia-Ukraine war.

In response, the Bangladesh Bank has said it would consider the demand against the reality. But bankers said such a facility will be harmful to their sector.

Following the coronavirus outbreak, borrowers enjoyed a complete loan moratorium facility in 2020, meaning banks did not show anyone defaulters despite their failure to repay instalments.

The following year borrowers enjoyed the same facility with a repayment of 15% in all types of loans. The moratorium ended on 31 December 2021.

Businesspeople have requested the central bank several times this year to extend the facility.

On Tuesday, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) – the apex trade body of the country – once again renewed the call in a meeting.

Bangladesh Bank Governor Fazle Kabir presided over the function, which was attended by officials of various departments of the bank and FBCCI President MD Jashim Uddin and its directors.

Jashim Uddin said due to the Ukraine-Russia war, the prices of all kinds of products in the world market have gone up.

"As a result, our import expenditure has increased significantly. Prices of capital machinery, oil and gas have shot up. Now our business is going bad. Therefore, we have demanded to extend the special facility of loan repayment moratorium till 31 December 2022," he told journalists.

However, Sirajul Islam, an executive director and a spokesman for the central bank, said businessmen were seeking relief from being defaulters without paying their loan instalments until next December.

"But we also have to see the interest of banks in terms of reality. Earlier, this facility was given due to Covid-19 but now we have been able to get out of the pandemic. Therefore, the central bank will review the issue," he said while briefing journalists on the outcome of the meeting.

Selim RF Hussain, managing director of Brac Bank and chairman of the Association of Bankers Bangladesh (ABB), told The Business Standard, "The Bangladesh Bank will take a decision considering the overall situation. I think the central bank will make a decision based on the overall condition of banks and the economy of the country," he added.

On condition of anonymity, the managing director of a private bank said, "When the prices of commodities go up in the world market, businessmen are also increasing the prices in the domestic market, so there is no harm to their business. It's ridiculous the kind of benefits that businessmen want."

"Banks have not posted a considerable profit for the last two years. They have to pay interest against their deposits. Giving such a facility to borrowers will have a huge impact on the banking sector. Many depositors will withdraw their deposits from banks. Therefore, the central bank should not continue such a facility," he added.

FBCCI President Jashim Uddin said they have also applied to the central bank to increase the Export Development Fund (EDF) from $7.5 billion to $10 billion to further expedite and expand their shipments.

"Payments for our exports are being delayed. Due to which we have sought an increase in the loan facility of this fund," he added.

According to the EDF's incentive loan figure, the target for the current financial year was to provide a loan facility of Tk29,750 crore to the sector. Of which, about 93% have been disbursed by 15 March 2022.

"We had a number of institutions, including Shilpa Bank, for industrial sector loans, but now we have applied for long-term loan schemes," the business leader said.

The country needs large industries to be set up to face the challenges of graduating from the least developed country (LDC), he added.

Jashim Uddin said, "Currently, it is difficult for us to repay in five to seven years after taking industrial loans from banks. We have called upon the central bank to provide a refinancing fund. Through which banks can give long-term loans. The central bank said it would consider the matter positively."

"We have asked the governor to give banks 10-15% of their total liquidity for a long term which will be refinanced by the Bangladesh Bank," he added.

Sirajul Islam said that in the past, the defaulted loan had the facility to be restructured once for ten years with a 2% down payment. The time for that facility is over. Businessmen have demanded that the loans be rescheduled with a new down payment.

He said that the businessmen have called for increasing the incentive rate of remittances. The Bangladesh Bank has made a proposal to the government in this regard.

The central bank will also review the EDF's request for an increase in the fund, he added.