Non-banking Financial Institutions (NBFIs) customers will not be defaulters if they repay a minimum of 50 per cent loan instalments due in June by August 31, 2021.
Based on the circular issued by the Department of Financial Institution and Markets of the Bangladesh Bank on July 5, the balance of the instalments has to be paid with the next instalment.
Previously on June 27, 2021, the same facility was provided for the banks.
The circular stated that the facility is being granted to maintain the momentum of the current economic activity and to curb the negative effects of the deteriorating COVID-19 situation on trade and commerce.
So to tackle the adverse effects of the current pandemic, the facility of non-payment of loan instalments of banks and non-banking financial institutions, in addition to stoppage of loan classification, was also provided throughout the previous year.
In 2021, the facility was extended till March at first depending on the type of loan. Later, it was further stretched to June 30.
But, after demands from different factions including businessmen, Bangladesh Bank decided to provide the customers with the facility of paying half the instalment, instead of not paying the full instalment, in order to avoid being defaulters.
The circular said no penalty interest, additional charges, fees or commissions can be imposed on the loans till August 31.
In the condition that interest or profit of the loan, to which the facility is being provided, is recovered, it can be transferred to the income of the financial institution. Other than that, other current policies related to loans and interest will remain intact.
Financial institutions are burdened with bad debts. The default rate in this sector is much higher than in the banking sector.
At the end of September 2020, the amount of defaulted loans of non-banking financial institutions stood at Tk 10,245 crore, which is about 15 per cent of the total loans disbursed. In the banking sector, the rate was about 10 per cent.
As of right now, there are 34 non-banking financial institutions. From those, a minimum of 10 is in critical condition. They are not able to return the money on time to customers.
PK Haldar has created the biggest example of financial irregularities. At least five financial institutions have sunk due to his corruption.
A fact-finding committee was formed in February to find out the central bank officials who were accomplices in PK Haldar’s corruption. The committee is expected to submit its final report this month.