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Farasuddin suggests setting up of debt management cos

Bid to fight default loans

STAR BUSINESS REPORT
Former Bangladesh Bank (BB) Governor Dr Mohammad Farasuddin suggested formation of debt management companies to get rid of the default loans in the country.
Citing Indonesian example, he said the country hit hard by East Asian financial collapse in 1996, recovered well as it reduced the bad loan to six per cent from a staggering 50 per cent with the help of debt management company.
The former governor was addressing a seminar on "Financial and Investment Services in a Changing Environment" jointly organised by the Dhaka Chamber of Commerce and Industry (DCCI) and
Centre for International Private Enterprise (CIPE) at the DCCI auditorium in the city yesterday.
Dr Farasuddin said if the banks are able to realise half of their bad loans, it would add at least two per cent to the country's GDP.
"The irony is that we live in a country where rebate and other rewards are offered to those who defaulted on bank loans but the timely repayers are not, which further encourage defaulting," he said.
The ex-governor was also very critical of the sole authority of the Board of Directors of banks to make decision on sanctioning loans. "The system leaves scope for manipula-
tion and politicisation of the process," he said.
To evolve a sound financial and investment system, he said, economics must be separated from politics.
Dr Farasuddin stressed the need for flourishing of small and medium enterprises(SMEs) and for that he recommended a separate financing institution, which has to offer collateral-free loan at a low interest rate.
Dr Mahmood Osman Imam and Prof Salahuddin Ahmed Khan of Finance and Banking Department of Dhaka University presented a keynote paper at the seminar.
In the paper, they recommended export diversification, development of industrial infrastructure, quick deregulation of SOEs, grooming skilled manpower, tax reform and improvement of law and order attract more FDI. They also advocated strong political will to reform financial sector.
Jahiruddin Khan, former Minister for Industries and Planning, Matiur Rahman, President of DCCI, Syed Naser Bukhtear Ahmed, Managing Director of Prime Bank Ltd, MA Momen, Director of DCCI, Dr Mustafizur Rahman, Director of CPD, Ferdaus Ara Begum, Joint Secretary and Co-ordinating Officer of DCCI-CIPE, ERRA Project, and Brigadier (retd) Mostafizur Rahman, Chairman of BEPZA also spoke at the seminar.