Although Bangladesh Bank recently introduced a one-time ‘exit’ facility to reduce the banking sector’s defaulted loans and recover stuck funds, businesses are not seeing its benefits in practice. Nearly two weeks after the central bank’s directive, a large share of private banks have yet to take a clear position on accepting applications, waiving interest or settling loans.
Many banks are showing reluctance to implement the facility, citing risk, the need for board approval, financial loss and fears of future default, Bangladesh Pratidin reported.
Businesses, meanwhile, say that offering only interest waivers or one-time settlement will not be enough. A prolonged downturn, the pressure of high interest rates, disrupted production and a cash crunch have shut down several hundred industrial units, they say.
Unless new financing is arranged on easy terms to restart these units, recovering defaulted loans will not be possible either, they argue.
In a circular issued on June 29, Bangladesh Bank said loans classified as bad or loss on the base date of June 30, 2026, could be brought under the one-time ‘exit’ facility. The facility would be granted subject to the approval of the bank’s board and on the basis of the bank-client relationship, and eligible borrowers would have to repay the entire outstanding amount in one go, with each bank considering applications individually.
However, loans fully rescheduled between August 6, 2024 and June 30 this year have been kept outside the facility. Short-term agricultural loans and loans in the cottage, micro, small and medium enterprise (CMSME) sector will also not fall under it. Bankers say the initiative could prove effective in recovering large amounts of long-stuck defaulted loans, allowing banks to get cash back and increasing their capacity to lend afresh; but the central bank has directed that necessary documents be verified and investigations completed before any client is granted the facility. Bankers, however, are pointing to major complications in implementation. They contend that the circular is not clear on waiving interest on private-bank loans. Under conventional banking, interest is added to a loan every quarter and becomes part of the new principal; year after year, interest has been added to principal in this way, which banks have shown as income. Tax has been paid to the government on that income, and dividends have been distributed to shareholders. As a result, many bankers believe it is not realistically possible for a bank now to waive or refund interest that has already been counted as income. Businesspeople, on the other hand, argue that most defaulting industrial entrepreneurs do not currently have the money to repay a loan in one go; had they had the money, they would have restarted their own closed factories first. Unless a business is running, they say, the capacity to repay a loan will not be created, so, if new loans were arranged from the 20,000-crore-taka stimulus fund, restarting factories would boost employment.
According to industrial police and entrepreneurs’ associations, more than 500 industrial factories have shut down permanently over the past two years amid gas and electricity shortages, high interest rates, excess production costs and a lack of financing. The closures have left large numbers of workers jobless; about 1.5 lakh workers have lost jobs in the ready-made garment sector alone, and the figure would be much higher once other sectors are included. Against this backdrop, the government has formed a 20,000-crore-taka pre-financing scheme to restart closed industrial and service-sector units. Operated using banks’ surplus liquidity, the fund aims to provide new financing to partly or fully closed industrial and service enterprises facing a working-capital crunch, so that they can return to production. BGMEA president Mahmud Hasan Khan Babu told Bangladesh Pratidin that if the owners of closed factories had money in hand they would have restarted the factories, so offering only a one-time interest waiver and a chance to repay loans would not solve the problem; to restore production and employment, new loans must be provided on easy terms from Bangladesh Bank’s announced 20,000-crore-taka special fund. With financing from this fund, he said, many closed industrial units could return to production and banks’ defaulted loans could also gradually be recovered.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said that when applications for the one-time exit facility came in, they would be properly scrutinized and necessary steps taken in line with Bangladesh Bank’s policy, and that clients would have to repay loans in one go as directed by the central bank.
Arif Hossain Khan, executive director and spokesperson of Bangladesh Bank, told Bangladesh Pratidin that the one-time exit facility’s policy had been framed in consultation with banks, with the aim of enabling banks to offer the facility to clients without running into complications. Entrepreneurs wishing to restart closed factories could also borrow from the 20,000-crore-taka special fund, he said, and Bangladesh Bank would, if necessary, monitor whether these directives were being properly implemented.
Dr. Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD), said the initiative was a positive step for recovering stuck loan funds, boosting liquidity in the banking sector and reducing the backlog of long-running loan-related litigation. There were, however, some policy issues and practical complications in its actual application, he said, and giving them a clear explanation would make the policy more effective.
According to those concerned, while the one-time exit facility is an important step toward reducing defaulted loans, the desired results will not come from offering only a chance to settle loans; if new financing can be ensured quickly to revive closed industrial units, positive change could come in all three areas: production, employment and bank-loan recovery.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report