BB caves in to Beximco again

Beximco Ltd got its way, yet again. The central bank went out of its way to accept Beximco’s request for rescheduling demand loan of Tk 430.05 crore, and in so doing, created a moral hazard for the banking sector.

A beneficiary of the Bangladesh Bank’s earlier large loan restructuring policy in 2015, Beximco Ltd was not supposed to get another chance to reschedule its loans.

When the BB had offered the restructuring facility in 2015, one of the conditions was that the borrowers would be marked as defaulters if they fail to pay two consecutive instalments; their benefits would be withdrawn and they would be barred from any rescheduling facility in future.

But half way into the rescheduled loan tenure, Beximco Ltd was stuttering again to pay back its instalments.

Anticipating it would be marked as a defaulter, it requested Sonali Bank to reschedule its loans again to give it a longer horizon to pay back the loan, which the state bank got on board with.

On July 8, Sonali wrote to the central bank requesting for Beximco Ltd’s rescheduling of demand loan from six years to 12 years.

And the central bank high-ups on Wednesday gave the application its nod, a development that can be viewed as a stunning reversal of its stance.

As per the 2015 policy for large loan restructuring, borrowers will get maximum of six years to pay back their demand loans.

A demand loan is a short-term loan whose duration is a maximum of one year. Banks provide the financing facility in the form of working capital in most cases.

What is incredible is the central bank is hoping to walk back on its stance without anyone noticing it: it did not issue any notice to inform of amendments of some of the terms of its 2015 large loan restructuring policy as per rules.

“The central bank is trying to conceal the matter in order to avoid criticism,” said a BB official requesting anonymity.

Contacted, Md Serajul Islam, spokesperson and an executive director of the BB, said, “No decision has been taken yet on whether a new notice would be issued.”

Salman F Rahman, vice chairman of Beximco Group, declined to comment on the matter.

Md Ataur Rahman Prodhan, managing director of Sonali Bank, told The Daily Star yesterday that he was yet to be informed of the central bank decision.

“But, such decision will have a positive impact on my bank as one of the loans will become regular,” he added.

The approval to Beximco Ltd comes on the basis of a decision taken by the central bank board earlier on August 27, BB Spokesperson Serajul told The Daily Star yesterday.

The central bank’s board of directors decided to allow large borrowers going through cash flow problems and struggling to give instalments regularly to reschedule the demand loan portion of their restructured large loans. Defaulters though will not get to avail the latest facility.

In other words, their instalment amount will lessen as the amount outstanding will be spread out over a longer timeframe.

Beximco’s request means the other 10 businesses that had restructured their loans amounting to Tk 15,180 crore under a special package will get to reschedule a portion of their outstanding amount under favourable terms.

And this is not the first time Beximco, which alone accounted for one-third of the total restructured loan amount, was given preferential treatment out of the 11: in April last year it was allowed to pay instalments in such a way that it had to put in smaller amounts in the first couple of years.

Salehuddin Ahmed, a former governor of the central bank, said the BB should not revise the policy as the large borrowers has given their business plan on how they would pay back loans.

“The latest decision will not bring any good for the financial sector,” he said.

The BB should not conceal its decision on revising the policy for large loan restructuring and it should issue a notice within a short time.

Khondkar Ibrahim Khaled, a former deputy governor of the central bank, said: “The central bank’s credibility has now come under question because of the latest decision. This means, the company is more powerful than the central bank.”

The government should control such types of companies in the interest of the financial sector or else the autonomy of the central bank will deteriorate further, he said.

As of March, the total amount of restructured loans stood at Tk 17,225 crore, up 15.25 percent from four years earlier, as most of the 11 borrowers did not pay their instalments on time.