AKM Zamir uddin

The country’s banking sector has seen a declining trend of lending in recent days as the majority of businesses have put on hold their expansion plans or trading due to the ongoing economic fallout from the global coronavirus pandemic.

But the situation changed suddenly yesterday soon after the central bank had eased the interest payment for borrowers from April to June.

The businesses requested lenders either to increase their credit ceiling or give out the undisbursed portion under their demand or continuous loans.

Clients are allowed to take loans in line with their loan requirement in phases as per the credit ceiling set by banks for demand or continuous loans.

“The sudden credit demand is completely absurd. And the majority of the loan seekers is delinquent. So, we have been compelled to request the central bank to stop the rush,” said a managing director of a bank wishing not to be named.

The central bank directed banks on May 2 to transfer all interest accrued or to be accrued between April 1 and May 31 this year from all of their loans to an interest-free blocked account.

This has helped the borrowers during the ongoing fallout as banks are not permitted to impose compound interest on the total outstanding loans of the businesses.

But, a portion of borrowers tried to misuse the facility, which forced the central bank to issue a fresh notice yesterday asking lenders to provide the credit support on the borrowers given their outstanding loans until March 31.

“Banks now face huge losses due to the recession as a portion of the delinquent borrowers is still trying to misuse the banks’ fund,” the MD said.

This is a good measure beyond doubt as it has stopped the vested quarter from embezzling the public money from banks, he said. A blocked account refers to an account that does not allow for the indiscriminate withdrawal but instead has certain restrictions or limitations on when, how much, and by who, capital can be withdrawn.

Besides, banks are not allowed to transfer the interest or profits deposited in the blocked account of the borrowers to lenders’ income book until further notice, according to a Bangladesh Bank notice. If any borrower does not give any interest under the block account facility, banks are not allowed to ask clients to pay back the amount until further instruction.

The creation of the block account means borrowers might get further facilities in the days ahead, a BB official said.

“The central bank may either ask banks to waive the whole amount of interest in the block accounts or adjust the amount with their principal amount of loans,” he said.

The central bank is yet to take any decision to this end. The government earlier assured businesses of taking an initiative to reduce their burden of high-interest bill.

If the interests or profits have already been shown as incomes, it has to be adjusted through a reverse entry. A decision on adjusting the interest or profits transferred to the blocked account will be issued later, the notice said.