Why relax the loan rescheduling policy?


The High Court yesterday questioned the legality of the Bangladesh Bank’s decision to grossly relax the policy of rescheduling delinquent loans.

It issued a rule asking respondents to explain in four weeks time why the central bank’s circular issued on July 18, which set out changes that would have favored defaulting debtors, should not be dropped.

Eight senior government officials – including the cabinet secretary, the principal secretary in the Prime Minister’s Office, the finance secretary, the legal secretary and the BB governor – have been challenged by the rule.

Judge JBM Hassan’s Bench and Judge Razik-Al-Jalil handed down the rule, after the human rights organization Human Rights and Peace for Bangladesh (HRPB) filed a motion for an injunction, challenging the legality of the circular.

According to the circular, defaulters will now have a maximum of eight years to repay term loans instead of two years as previously stipulated.

Defaulters would also be allowed to reschedule their non-performing loans (NPLs) four times instead of three, along with other benefits, BB said.

During yesterday’s hearing, HRPB lawyer Manzill Murshid told the court that BB issued the notice to patronize large defaulters which is discriminatory and unconstitutional.

Depositors will be harmed and the financial position of banks will weaken because of the new provisions, he argued.

Attorney General AM Amin Uddin objected to the petition, saying BB issued the circular in the public interest and in line with government policy decision.

The central bank has the legal right to issue such circulars in the public interest and therefore the petition is not acceptable, argued the attorney general.


Comments are closed.