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BB privilege for loan defaulters

HC rules over same facility for NBFIs

FE REPORT | December 03, 2019 00:00:00

The High Court issued on Monday a rule upon the bodies concerned of the government to explain in four weeks as to why the inaction and failure to publish similar type of circular like BRPD Circular No. 5 dated May 16, 2019.

The circular allowed defaulters to reschedule their defaulted loans upon a down payment of just two per cent of the total loan, for the non-banking financial institutions (NBFIs) should not be declared illegal.

In the rule the High Court also wanted to know as to why the respondents should not be directed to publish similar type of circular like BRPD circular no. 5 dated May 16, 2019, for the borrowers of the NBFIs.

Bangladesh Bank (BB), BB Governor, General Manager of the Department of Financial Institutions and Markets (DFIM) of BB, General Manager of Banking Regulation and Policy Department of BB and Managing Director of Phoenix Finance and Investment Limited have been made respondents in the rule.

The HC bench of Justice J B M Hassan and Justice Md Khairul Alam passed the order after hearing on a writ petition filed by Md Younus Patwary, a borrower of a non-banking finance institution, Phoenix Finance and Investment Limited.

Advocate Polash Chandra Roy and Advocate Md Razu Howlader Palash appeared in the court on behalf of the writ petitioner while Deputy Attorney General Masud Ahmed stood for the state.

It was said in the petition that recently, considering the present hardships of the businessmen, adverse economic condition of the country and to mitigate the liquidity crisis, the BB authorities had published a circular through BRPD which provided the businessmen (who has suffered immense loss in business) like the petitioner to reschedule their loan with the banks in some flexible and business friendly terms and conditions. The said circular applies to the nationalized commercial banks and financial institutions in the same manner as it applies to schedule banks.

The petitioner has made representation to the Phoenix Finance and Investment Limited to obtain the facility provided under the BRPD circular. But they have refused to give the petitioner any such facility stating that the said circular of BRPD is only effective and applicable for the Banks.

Misinterpreting the said circular and without having a separate circular issued by the Department of Financial Institutions and Markets (DFIM), the financial institutions are depriving the borrowers including the petitioner of the rescheduling under the said circular, for which the petitioner along with many other businessmen are suffering tremendous difficulties.

The petitioner on September 05 and September 12 this year served a letter and a legal notice to the respondents requesting them to issue a direction upon the non- banking financial institutions to publish a similar circular that of BRPD within seven days of receipt of the notice. But the respondents paid no heed thereto. Then the petitioner on November 07 filed the writ petition challenging the failure of the respondents to issue a similar circular.

The same High Court bench on November 03 this year cleared the Bangladesh Bank circular offering special facility for the defaulting borrowers and ordered the issuance of a circular extending its time for another 90 days to facilitate submission of fresh applications.

While disposing of the rule issued on a writ, the HC also asked the BB to constitute a nine-member committee comprising banking experts to find out the loopholes in loan sanctioning process.

The court, however, said the defaulters availing the special facility will have to follow the master circular of the central bank issued in 2012 in the case of other loans which said defaulters must pay at least 15 per cent of the "outstanding balance" to avail the rescheduling facility and fresh credit facility from banks.


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