Regulator creates special exit for defaulters

The central bank offers a special bailout to loan defaulters with non-banking financial institutions (NBFIs) through 'One Time Exit' by clearing all dues within one year, in the wake of bad-loan buildup.
The borrowers will have to apply by paying 2.0-per cent down payment for availing such facility only after approval by the NBFIs concerned, officials say.
To get the special offer, the interested borrowers will have to apply to the NBFIs concerned by April 30 this year for availing such facility, according to a notification issued Tuesday by Bangladesh Bank (BB).
All NBFIs are eligible to take necessary measures after receiving applications for the facility on the basis of balance calculated on December 31, 2021.
The central bank also says the NBFIs are allowed to waive different types of interest, maximum 50 per cent, on the basis of NBFI-client relationship in line board of directors' approval. "But principal amount cannot be waived in any circumstances."
Earlier on May 16, 2019, the central bank offered similar facility to loan defaulters to banks.
The latest BB moves on policy support came against the backdrop of rising trend in non-performing loans (NPLs) in the NBFIs in recent months.
The volume of classified loans with the country's NBFIs increased nearly 14 per cent to Tk 117.57 billion as on September 30 from Tk 103.28 billion three months before.
"We've offered the special facility to loan defaulters to NBFIs aiming to enhance cash flow in the sector," a BB senior official told the FE while replying to a query.
The central banker also says such facility will help reduce the amount of classified loans with the NBFIs.
Md Nurul Amin, chairman of FAS Finance and Investment Limited, welcomes the BB moves, saying that it will help the NBFIs through reducing the volume of NPLs.
Mr Amin, also former chairman of the Association of Bankers, Bangladesh (ABB), notes that in case of large loans, repayment will be easier if the tenure is extended.
Actually, the NBFIs had not been allowed to classify loans or leases adversely until December 31, 2020, in line with BB directives.
Earlier, the central bank had asked the NBFIs not to get tough while classifying loans to help businessmen offset the adverse impact of the Covid-19 pandemic on their businesses.
Besides, Proshanta Kumar Halder, also known as PK Halder, a former managing director of Reliance Finance Limited, allegedly embezzled about Tk 35 billion from four NBFIs, creating disarray in the entire NBFI sector of Bangladesh.
Meanwhile, in a twin-move, the central bank brings the non-banking financial institutions under its regular monitoring through specifying components of their capital-market investment.
The NBFIs have been asked to submit report on capital-market investments in a prescribed format to the Department of Financial Institutions and Markets of the Bangladesh Bank on a quarterly basis, according to a different notification issued on the day by the central bank.
Under the notification, the BB has specified investment-listed share, debenture, corporate bond, mutual fund and other capital-market instruments at market prices, outstanding loans to subsidiaries and associates, loan to company or companies involved in capital-market activities directly or indirectly and others as capital-market exposure of the NBFIs.
"We've made the move to ensure accountability and transparency in the capital-market investment by the NBFIs," a BB senior official told the FE while explaining the main objective of the notification.

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