Bankers Worry Central Bank’s Actions Could Compromise Financial Stability
September 9, 2025, 07:20 AM
Last revision: September 9, 2025, 08:54 AM
Key Points:
- Politically connected factories were offered a 12-year loan rescheduling without interest.
- The rescheduling conditions contradicted the Bangladesh Bank’s regulations.
- Banks can issue new loans after reevaluating collateral.
- Approximately 400 companies have qualified for special rescheduling.
- Notable defaulters also benefited from these arrangements.
- Bangladesh Bank plans to introduce further guidelines for banks regarding rescheduling.
Some denim factories with political ties received a generous 12-year loan rescheduling from 12 banks, with no interest required. Borrowers could stabilize their accounts after a two-year grace period by making a minimal 2% down payment.
The Bangladesh Bank had instructed these banks in a letter dated May 18, indicating this decision followed Central Bank’s Rescheduling Committee recommendations.
Another similar factory owned by the same person also benefited from a 12-year restructure despite already having repaid its loan.
However, permitting the restructuring of certain loans contradicts the Bangladesh Bank’s own policies, which normally require legal measures to remove problematic loans from a bank’s balance sheet.
The central bank’s letter further allowed banks to issue fresh loans to denim and spinning mills after reassessing collateral.
Officials from the Rescheduling Committee reported that nearly 400 firms have been granted special considerations for loan rescheduling thus far. Yet, many bankers are expressing significant concerns about these developments, fearing they could strain financial institutions excessively. During an August committee meeting, banks voiced their opposition to the central bank’s initiatives.
Some bankers pointed out that loan rescheduling should ideally be a negotiation between the bank and the borrower. They expressed apprehensions that long-term interest-free rescheduling could destabilize banking operations.
MD Sirajul Islam, the executive director of Bangladesh Bank and the committee head, acknowledged these concerns, suggesting that a temporary circular would allow banks more discretion in providing special rescheduling options.
When asked about who would qualify, Sirajul mentioned individuals impacted by political influences over the past 16 years and who faced losses due to economic downturns.
Members of the committee, who preferred to remain anonymous, indicated that some borrowers may have been exempted from standard procedures due to severe discrimination under past governments.
For instance, there are cases of borrowers who had faced significant personal repercussions, suggesting that the committee could exercise leniency based on their circumstances.
Controversial Beneficiaries
Some companies, including Ankur Specialized Cold Storage Limited, received favorable rescheduling despite being classified as serious defaulters. This company had accrued substantial debts between 2022 and 2024 without repayments, raising significant concerns about their financial practices.
The existing regulations allow up to four rescheduling opportunities, but Ankur was granted a fifth in December 2022, which some see as a violation of procedure. Other companies also faced scrutiny for irregularities in loan approvals.
Reports also highlighted mismanagement in granting loans to certain companies like Rensity Limited, which reportedly used falsified export agreements to secure multiple loans. Such discrepancies have been characterized as intentional misconduct.
Sirajul stated that BB had set up a committee to review large-scale default restructurings, although questions about its transparency and effectiveness remain. Observers fear that the concessions could encourage lobbying and other unethical practices within the banking sector.
In response to various concerns raised, the BB is preparing to issue a new circular, aiming to align practices with existing regulations on loan rescheduling.
