A SIGNIFICANT number of borrowers with proven track records face financial distress as the strict, new loan classification rules and rescheduling policy have classified them as defaulters, limiting their access to capital. This is a cause for concern. More than a thousand borrowers, mostly in export-oriented sectors such as textiles, apparel and leather, keep struggling with working capital shortage. The financial distress has also reportedly led to a reduction in production and, in some cases, the shutdown of factories. While the stringent loan classification and rescheduling policies are necessary, given that such facilities were abused by borrowers enjoying political clout during the Awami League regime that sharply increased the volume of non-performing loans, a blanket application of the policies appears to have had some unwelcome consequences. Genuine borrowers who have failed to repay their loans because of circumstances beyond their control are now affected along with the economy. A number of borrowers have failed to repay their loans in the latter half of 2024 because of production slowdown and operational disruptions caused by political unrest and economic sluggishness and were subsequently classified as defaulters. Lenders then refused to offer the borrowers any rescheduling facilities, fearing regulatory backlash.
The Bangladesh Knitwear Manufacturers and Exporters鈥� Association and the Bangladesh Garment Manufacturers and Exporters鈥� Association have said that many reliable borrowers have unduly borne the brunt of the stringent regulatory measures. The Bangladesh Bank has, however, launched a special initiative to assist large borrowers who defaulted because of circumstances beyond their control, by forming a committee to assess applications for restructuring defaulted loans exceeding Tk 50 crore. So far, at least 1,253 companies have reportedly applied for relief under this initiative, but only 80 of them have received any form of relief 鈥� either loan rescheduling or rescheduling with reduced down payment and interest waivers. Business insiders, however, complain of a slow pace of application assessment, saying that at the current rate, it could take two to three years to complete the pending applications. Moreover, there are allegations that rescheduling facilities have been largely granted to borrowers with political connections. Another concern is that small-scale borrowers are mostly left out of the central bank鈥檚 initiative and, when included, have faced delays. Borrowers with loans from multiple banks are also in a tight spot because of coordination gaps between banks, which have further delayed final approvals from the committee.
The central bank should, therefore, address the issue urgently and sincerely. It should expedite the process of resolving pending applications. Banks should also assess the status of small-scale borrowers and offer them relief if they are found to have a good repayment track record.
