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Substantial relief for HBFC loanees soon

By S Y Bakht
The government has deckled to case the burden of outstanding loans of the borrowers of House Building Finance Corporation (HBFC).
Finance Minister M Saifur Rahman told The Daily Star on Friday a "significant roller for borrowers of HBFC loans would be announced by the end of this month.
He added that the move would be aimed at Inducing borrowers to repay outstanding loans so that funds could be generated to enable the re sumption of loan operations. "We want to resume providing house-building loans in the cities and tn the districts as soon as possible.”
Loan operations of HBFC were suspended earlier on Muy 1989 because of a poor loan recovery rate and lack of fresh funds About 48.000 borrowers owe more than Taka 12.00 crore in outstanding loans to HBFC.
The lone housing sector funding agency in the country. - HBFC was set up in 1952 and has a paid-up capital of about Taka 10 crore. The lending
operations were funded by selling debentures to various commercial banks and to the Bangladesh Bank
According to a Finance Ministry source, the total outstanding amount owed by HBFC In debenture loan principal and Interest stood al Taka 1503 98 crore as of December 1991.
The total financial loss of the Institution stands at over Taka 350 crore This amount will increase further unk-ss the recovery situation improves soon." tile source added
Loans recovered by HBFC every year cannot even pay for the annual Interest and princi pal amount repayment of its debenture loans. Currently the principal and Interest payments of debenture loans totals about Taka 108 crore per year yvhiic the recovery of outstanding loans per year is about Taka 105 crore.
Furthermore, the 'miss-match" between the interest rate charged to the borrowers and what the HBFC has to pay for debenture loans Is also adding to the financial loss of
the institution.
HBFC charges borrowers al a simple interest rate whlk banks charge tile corporation at a compound intcresl rate for the debenture loans.
Earlier, the previous gov eminent had approved a plan to convert HBFC into a bank but the plan was later shelved by the can- taker government
In October last year repro sentatlves of the BarHltedes, House Building Borrowers Association met with the Finance Minister.
According Io Fazlui Haque General Secretary of the asso elation. a number of demand** of the borrowers were placed before the minister including canccllatfon of court cases against defaulters, withdrawal of lump sum and penalty Inter csts. extension of the deadllnc for the payment of outstanding loans In Installments Imple mentation of simple intcrcsl system as practiced In banks and formation of a committee to solve Ihc problems of this sector.
Haque said according to as surances from the minister court cases had been suspended for a few months, but Were resumed recently.
He added that the Finance Minister had also agreed to waive 50 per cent of lump sum Interests and divide the rest into Installments payable within t^c loan-term. The minister also assured to waive the total amount of penalty interests. Haque said.
However, the Finance Ministry source said that demands of the borrowers' association were being constdeatt but added no decision had bcert taken in this regard.
He pointed out that all dp-Uons. including turning it into a commercial bank were being considered to make HBFC financially viable again. He said as funds, need to be re cycled to provide new loans, the borrowers need to play leading role and should repay the outstanding amounts to refurbish the funds.