BB’s loan rescheduling: Relief for borrowers, burden for banks
Bankers fear central bank-imposed facilities will hurt sector stability
Highlights:
- Politically linked mills granted 12-year rescheduling, no interest
- Rescheduling included written-off loans, contradicting BB's own circular
- Banks allowed to issue fresh loans after collateral revaluation
- Nearly 400 companies gained special rescheduling under BB committee
- Wilful defaulters, like Ankur , also received facilities
- BB plans new circular, leaving rescheduling to individual banks
A denim mill owned by a politically connected individual received a 12-year loan rescheduling facility across 12 banks without paying any interest. The borrower was allowed to regularise accounts by paying just a 2% down payment, with a two-year grace period.
Bangladesh Bank (BB) issued a letter on 18 May, instructing all 12 banks to implement the rescheduling, in line with the central bank's rescheduling committee decision.
Keep updated, follow The Business Standard's Google news channel
Another spinning mill owned by the same individual also received a 12-year rescheduling, despite its loans having already been written off.
Allowing rescheduling of written-off loans contradicts Bangladesh Bank's own circular, as such loans are removed from banks' balance sheets. Recovery typically requires legal proceedings, with the bank filing a case against the defaulter before writing off the account.
The central bank letter also permitted banks to extend new loans to both the denim and spinning mills after revaluing their collateral.
According to officials of the rescheduling committee, Bangladesh Bank has already allowed nearly 400 companies to reschedule loans under special consideration.
However, bankers have raised concerns, saying such moves place undue pressure on financial institutions. At an August committee meeting, bankers objected to the central bank's practice of imposing these facilities.
Speaking to The Business Standard, several bankers said loan rescheduling should be negotiated between banks and clients rather than imposed by the central bank. They warned that long-term rescheduling without interest could seriously undermine banking operations.
Md Sirajul Islam, executive director of BB and convenor of the committee, acknowledged the concerns. He said the central bank plans to issue a temporary circular allowing banks to provide special rescheduling facilities at their discretion.
Asked which borrowers would qualify, Sirajul said they were largely individuals politically affected over the past 16 years, who suffered losses from sharp devaluation of the taka.
A committee member, speaking on condition of anonymity, said some cases were considered beyond the panel's Terms of Reference because the borrowers were "highly oppressed and extremely discriminated against" under the previous regime.
"Some people were jailed for 16 years, some were taken to Aynaghar, and some were affected by the S Alam Group," he said. "In such cases, the ministry suggested the committee could make special considerations for rescheduling facilities."
Borrowers who could prove severe discrimination from state-owned banks or Islami Bank, particularly due to S Alam Group's influence, were granted special rescheduling. Final approval rests with BB, with the governor signing off on each case.
Some firms who obtained benefits
Ankur Specialized Cold Storage Limited received a rescheduling facility despite being a top defaulter of Rupali Bank and Rajshahi Krishi Unnayan Bank, with Tk56 crore classified as a "bad loan."
Between 2022 and 2024, Ankur earned nearly Tk2 crore annually yet failed to repay its loans, leading BB to classify it as a wilful defaulter under the Bank Company Act.
Circular 33/2022 allows a maximum of four rescheduling opportunities, but Ankur received a fifth in December 2022. Irregularities were also found in loan approvals for affiliates Ankur Seed and Himagar Limited, reinforcing its wilful defaulter status.
Although Rupali Bank branches flagged weaknesses, the head office's industrial credit division violated rules by granting unauthorised loans, a punishable offence.
The February Credit Information Bureau report noted another affiliate, Bling Leather Products Limited, with total outstanding loans of Tk284 crore, including Tk230 crore in term loans, Tk17.58 crore in cash credit, and Tk1.55 crore in Covid-19 stimulus loans. These were recorded internally but not properly reported to the CIB.
Another beneficiary, Intensity Limited, a 100% export-oriented company with Agrani Bank, obtained back-to-back loans using forged export contracts.
Branch officials failed to verify contracts, leading to misrepresentation, understated liabilities, and delayed repayment of 105 import obligations, creating a demand loan of Tk27.95 crore after 18 months. The report classified these actions as wilful misconduct.
The Tanaka Group, a top Agrani Bank defaulter, also benefited. An inspection of Swiss Quality Paper (BD), a Tanaka concern, revealed serious irregularities, including deferred loan instruments violating the Bank Company Act.
The bank was fined Tk5 lakh, and disciplinary action against officials was mandated, with BB notified per the 17 August 2022 directive.
Rescheduling terms
BB's July 2022 Master Circular allows loan rescheduling for a maximum of eight years, with down payments between 2.5% and 4.5%.
Despite this, Hamid Fabrics (Mahin Group) received a 10-year rescheduling for term loans across seven banks on 18 August, with a one-year grace period and only a 2% down payment.
Its existing forced loans across the same banks were rescheduled under identical terms, following a letter signed by Director Md Bayazid Sarker and approved by the governor.
Aftab Group benefited similarly, with loans of four companies across nine banks and one financial institution rescheduled for 10 years, with a 2% down payment and a one-year grace period, approved at the Policy Support Committee's tenth meeting.
On 10 July, Universal Medical College and Hospital received special rescheduling: its first unit secured a 12-year facility with a one-year grace period, while the second unit's loans were rescheduled for eight years with a two-year grace period, subject to a 2% down payment.
Formation of the committee
On 21 January 2025, a discussion titled "Political Commitment to Revive the Economy of Khulna Division" was held, with BNP standing committee member and former commerce minister Amir Khasru Mahmud Chowdhury as chief guest.
Business leaders at the event said political cases over the past 16 years had forced many entrepreneurs to stay away from families and businesses, with some leaving the country.
Despite maintaining good bank relations, they were denied new loans, and previous benefits were suspended. They demanded one-time exit facilities for loans of Tk10 crore to Tk50 crore, with interest waived and principal repaid in 12 annual instalments.
In response, the Jashore Chamber of Commerce and Industry wrote to BB's Department of Offsite Supervision. A subsequent note by Director Bayazid Sarker was presented to Executive Director Mezbaul Haque, prompting ARD-1 to issue a circular in January this year forming a five-member policy support committee or the rescheduling committee.
The panel reviews and recommends restructuring for large defaulted loans, including policies on rescheduling, reclassification, restructuring, and interest waivers.
It examines loans of Tk20 crore or more defaulted due to factors beyond borrowers' control, excluding wilful defaulters.
Banks submit cases with board approval to the committee secretary, which meets at least twice a month and may convene additional meetings as needed.
Officials also raise questions
Questions have arisen over the committee's functioning. The 2022 Master Circular states wilful defaulters are ineligible for rescheduling.
Senior officials said the Bank Inspection Department, FICSD, and Department of Offsite Supervision regularly inspect these loans, often finding evidence of fraud. Yet the Policy Support Committee has granted facilities without proper verification.
Some officials noted that concessions encourage lobbying at the governor's office under political influence to secure benefits.
Meanwhile, following concerns from central bank officials and bankers, BB plans to issue a new circular.
Senior officials told TBS the committee's practices conflicted with the loan rescheduling master circular. The new directive will leave rescheduling entirely to individual banks, though facilities already granted under the Policy Support Committee will remain in effect, they said.
