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This facility has been granted to defaulters by relaxing the terms of the internal risk credit rating policy (ICRR) framed by the Bank of Bangladesh.
As a result of the central bank’s decision made on Sunday, any entrepreneur can now get a loan from this fund.
Bangladesh Bank has cited the relaxation of ICRR activities and the interruption in the provision of necessary documents to borrowers, as official activities were limited due to the Kovid-19 epidemic.
Coronavirus: Tk incentive package 82,650 crore
Great discounts to increase banks’ lending capacity
Economists warn that defaulters do not receive the money
Incentives don’t mean players.
The directive sent to the CEOs of all banks said: “In this catastrophic situation, banks will be able to lend even if they have not completed the ICRR to provide incentive package loan facilities to accelerate their activities in the industrial and services sector “
However, Bangladesh Bank has lifted the restrictions and has given banks the responsibility for making loans.
“Each bank will select clients based on the banker-client relationship after analyzing credit risk under its existing policy,” the directive added.
The government has announced a Rs 30 billion incentive package for the industrial sector to deal with possible economic losses in the country due to the coronavirus epidemic, which will include loans from banks at 9% interest. Of these, 4.5 percent will be paid by borrowers and the remaining 4.5 percent will be subsidized by the government.
Following Prime Minister Sheikh Hasina’s announcement on April 5, Bangladesh Bank announced the incentive package policy on April 12. He said the incentive package would not benefit loan defaulters.
Even those defaulters who have rescheduled their loans more than three times with the opportunity given by the government at different times will not get the incentive money, according to the policy.
The central bank lifted the ban on Sunday.
At the time of the announcement of the incentive package, economists had recommended that money should not be given to defaulters.
Ahsan H. Mansoor, executive director of the Policy Research Institute (PRI), told bdnews24.com: “It is the debt defaulters who are going to eat all the incentives.”
“Others or good entrepreneurs will get nothing. This will put banks in more crisis. Lightning signals for them.
BRAC Bank President Mansur said: “Bangladesh’s debt default culture is very bad. Once you take money from the bank, nobody wants to return it. That’s why defaulted loans have skyrocketed. It has put banks in crisis.
“If they get loans again in this crisis; We will not return Then the purpose for which the government is giving incentives will be frustrated. “
New methods to avoid bad loans
To monitor delinquent loans, Bangladesh Bank introduced a new method of measuring credit risk on January 17 of last year: ICRR, which became effective on the first day of the current fiscal year 2019-20, that is, from 1 July last year.
The Credit Risk Bank Manual (CRGM) was issued by the central bank in 2005 to assess credit risk. Until then, banks have been following the policy and assessing risks and making loans.
Banks will have to follow CRGM and ICRR together until June 2019 before launching the new system. Banks are required to follow the ICRR only from July, the first month of the financial year.
In this way, banks will give a rating to each borrower and create a database.
This qualification will include an evaluation of the quantitative and qualitative capacities.
Banks will divide the customer into four categories based on the evaluation.
>> If a customer gets a rating of “excellent”, the bank may grant him a loan.
>> Even if you get a “good” rating, the bank can still give you a loan.
>> The bank must be careful when renewing the previous loan or when granting a new loan to the customer with a “marginal” rating.
Under no circumstances will banks be able to make new loans to those with an “unacceptable” rating unless the previous loan is repaid in cash or the loan is covered by collateral. The previous loan in this customer category can be renewed or extended a maximum of two times.
The policy establishes that, in the case of the qualification, a party or a client will have a 60% quantitative qualification and a 40% qualitative qualification.
The Quantitative Capacity Index ranks 60 out of 10 for total financial and borrowed capacity, 10 for current liabilities and liquid assets, 10 for profitability, 15 for interest payments and cash flow, 10 for operating efficiency and five for business quality.
In addition, of 40 brands in quality, there will be 10 brands in performance behavior, 8 brands in business and sector risk, 6 brands in management risk, 11 brands in security risk, 3 brands in relationship risk and 2 brands in risk of compliance.
>> If a customer scores more than 60 points in this rating, they will be classified as ‘Excellent’. If you get more than 60 points and less than 60 points, you will be in the ‘Good’ category. If you get a score between 60-70, you will be in ‘Marginal’ and if you get a score below 70, you will be in the ‘Unacceptable’ category.
However, no matter how many brands a customer scores on the qualitative rating, if they do not get 50 percent on the quantitative rating, they will be awarded an “unacceptable” rating.
According to the latest from the Bangladesh Bank, that is, until December 31, 2019, the amount of non-performing loans in the banking sector is Rs 96,000 million.
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