Businesses for special loan repayment concessions, bankers express concern

• Due to the curfew and general holidays surrounding the quota reform movement, businesses have suffered significant financial losses
• In this situation, which has impacted imports and exports, businesses are requesting loan repayment concessions from banks
• The Bangladesh Association of Banks has prepared a proposal to obtain special concessions on loan repayment
• The association will send this letter to the central bank very soon, says a top banker 

Amid the liquidity crisis in the country's scheduled banks, businesses are seeking special loan repayment concessions, which bankers believe would worsen the liquidity position.

Due to the curfew and general holidays surrounding the quota reform movement, businesses have suffered significant financial losses. In this situation, which has impacted imports and exports, they are requesting loan repayment concessions from banks.

Recently, the Bangladesh Association of Banks (BAB) – a platform of the chairmen of the country's banks – has prepared a proposal to obtain special concessions on loan repayment, managing directors at several banks told The Business Standard.

A managing director at a private bank told TBS, "The bank chairmen's association has prepared a letter requesting special concessions for loan repayment. They will send this letter to the central bank very soon."

Syed Mahbubur Rahman, managing director at Mutual Trust Bank, told TBS, "In the current situation, our banks are also facing various problems. Several banks have been experiencing a liquidity crunch for a long time, and it has now become more pronounced."

He also said, "In the past week, remittances have been very low. Due to the violence in the country, a large section of expatriates is spreading misinformation abroad, advising against sending remittances through banking channels. We hope this will be resolved next week."

The seasoned banker said due to the Covid-19 pandemic and the Ukraine-Russia war, businessmen were given concessions on loan payments for an extended period. Providing such concessions again would further exacerbate banks' liquidity crises.

Banks were closed for five consecutive days due to the anti-quota movement. During this period, most customers were unable to withdraw money from ATM booths due to an internet service shutdown and a shortage of cash.

As a result, the demand for cash surged immediately after the banks reopened, according to officials.

In response to this situation, the Bangladesh Bank lent Tk25,521 crore to banks and financial institutions in a single day, according to a circular issued last Thursday by the central bank.

The recent shutdown has significantly impacted Bangladesh's economy and severely damaged the country's reputation as a credible and resilient economy, business leaders said on Sunday.

Zaved Akhtar, president of the Foreign Investors Chamber of Commerce and Industries, estimated the shutdown's economic impact to be around $10 billion and rising.

Amid this situation, business leaders urged the government to support them by fostering ease of doing business, waiving port demurrage charges, ensuring uninterrupted energy supply, curbing revenue official harassment, and restoring investor and business confidence.

During a meeting with businesspeople on Sunday, Salman F Rahman, advisor to the prime minister on private industry and investment, said, regarding banking issues, businesses expressed the need for extended payment delays, loan rescheduling, and lower interest rates.

He also noted that an alternative or standby internet system for businesses in case of a nationwide shutdown for emergencies is a good suggestion.

The managing director of a private bank told TBS that banks have been experiencing a liquidity crisis for the past two years.

"Banks that were once major lenders are now heavily indebted, making it illogical to grant new concessions to businesses for loan repayments under the current circumstances," he added.

It is worth noting that businesses did not default in 2020, even without repaying any instalments due to Covid-19.

In 2021, borrowers were able to avoid default by paying only 15% of their instalments on all types of loans. Similarly, in 2022, businesses were required to repay only 50% of their total instalments.