Delinquent borrowers rush to take good thing about no interest on loans for Apr, May
The country's banking sector has seen a declining trend of lending in recent days as nearly all businesses have put on hold their expansion plans or trading due to the ongoing economical fallout from the global coronavirus pandemic.
However the situation changed suddenly yesterday immediately after the central bank had eased the interest payment for borrowers from April to June.
The firms requested lenders either to improve their credit ceiling or give out the undisbursed portion under their demand or continuous loans.
Clients are permitted to take loans in line with their loan requirement in phases according to the credit ceiling set by banks for demand or continuous loans.
"The sudden credit demand is totally absurd. And the majority of the loan seekers is delinquent. So, we've been compelled to request the central bank to avoid the rush," said a managing director of a bank wishing never to be named.
The central bank directed banks on May 2 to transfer all interest accrued or to be accrued between April 1 and May 31 this season from all of their loans to an interest-free blocked account.
It has helped the borrowers through the ongoing fallout as banks aren't permitted to impose compound interest on the full total outstanding loans of the firms.
But, some of borrowers tried to misuse the facility, which forced the central bank to issue a brand new notice yesterday asking lenders to supply the credit support on the borrowers given their outstanding loans until March 31.
"Banks now face huge losses as a result of recession as some of the delinquent borrowers continues to be trying to misuse the banks' fund," the MD said.
This is an excellent measure beyond doubt as it has stopped the vested quarter from embezzling the general public money from banks, he said. A blocked account refers to an account that does not enable the indiscriminate withdrawal but instead has certain restrictions or limitations on when, just how much, and by who, capital could be withdrawn.
Besides, banks are not allowed to transfer the interest or profits deposited in the blocked account of the borrowers to lenders' income book until further notice, according to a Bangladesh Bank notice. If any borrower will not give any interest beneath the block account facility, banks are not permitted to ask clients to repay the total amount until further instruction.
The creation of the block account means borrowers might get further facilities in the times ahead, a BB official said.
"The central bank may either ask banks to waive the whole amount of interest in the block accounts or modify the total amount with their principal amount of loans," he said.
The central bank is yet to take any decision to the end. The federal government earlier assured businesses of taking an initiative to lessen their burden of high-interest bill.
If the interests or profits have been completely proven as incomes, it should be adjusted through a reverse entry. A decision on adjusting the interest or profits used in the blocked account will be issued later, the notice said.
