Government to favour businessmen even if banks face losses: Finance minister

The government will side with business owners regarding terms for default loans even if banks incur losses for this, Finance Minister AHM Mustafa Kamal has said.

In the wake of the Covid-19 pandemic, the government first decided not to classify borrowers as defaulters for failure to pay instalments between January and June.

This was aimed at protecting business owners from being listed as defaulters.   

The facility was later extended by six months in two phases. Now, borrowers can avail this facility until December.

"The government will be in favour of business owners because if they do not survive, banks will not either," the finance minister said.

He was talking to journalists Wednesday after a meeting of the Cabinet Committee on Economic Affairs. 

"If an export-oriented company defaults, its normal activities or letter of credit (LC) settlements will come to a halt. Considering this, the facility was given in the interest of trade and commerce," he said.

Asked whether banks will face a liquidity crisis or their operating profits will be affected because of the facility, the minister said, "Helping business owners has become necessary while fighting the pandemic. We considered many aspects when we made this decision. In this situation, both of the parties will incur some losses."   

He added that banks made good profits last year and the amount of their default loans had decreased as well. 

"Their balance sheets are in good condition," he continued.

The government did not waive interest on loans, and banks will get interest for this period, said the minister.

"Moreover, the Bangladesh Bank will not classify the loans as defaulted for not having received instalments. That is why the decision will not cause banks to face big losses," he added.