{"id":48057,"date":"2019-08-28T07:14:13","date_gmt":"2019-08-28T12:14:13","guid":{"rendered":"https:\/\/olduvai.ca\/?p=48057"},"modified":"2019-08-28T07:14:15","modified_gmt":"2019-08-28T12:14:15","slug":"bangladeshs-central-bank-offers-amnesty-to-delinquent-borrowers-prompting-mass-default","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=48057","title":{"rendered":"Bangladesh’s Central Bank Offers Amnesty To Delinquent Borrowers, Prompting Mass Default"},"content":{"rendered":"\n

Bangladesh’s Central Bank Offers Amnesty To Delinquent Borrowers, Prompting Mass Default<\/a><\/h3>\n\n\n\n

Bangladesh’s Central Bank in May introduced an amnesty program that allowed delinquent borrowers to make a small upfront payment and then pay off the rest of their debt over 10 years at favorable interest rates,<\/strong> according to Bloomberg<\/a>.<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

However, the plan also triggered a rush by healthy companies to reschedule debt on the same terms which, in turn, now threatens to overwhelm the country’s banks.<\/p>\n\n\n\n

The program is also seen as encouraging those with debt to default. Big surprise, right?<\/em><\/strong><\/p>\n\n\n\n

Anis A. Khan, managing director of Dhaka-based Mutual Trust Bank Ltd. said: <\/p>\n\n\n\n

\u201cI\u2019m traumatized by non-performing loans. Borrowers have been using every excuse they can find — from a death in the family to political uncertainty — to try to get onto the central bank program.”<\/p><\/blockquote>\n\n\n\n

The initiative is available to borrowers until September 7 and created a “perverse incentive” to default.<\/strong> Now, the country is expecting that nonperforming loans may rise significantly from 11.9% in March as a result of the program.<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

The upfront payment was lowered to 2% from 10% for those who are defaulting for the first time. The maximum interest rate over the next 10 years was set at 9%, even if borrowers were paying as high as 15% previously.<\/p>\n\n\n\n

And like all other great “Band-Aid” fixes to debt problems, the initiative has backfired: it has created a sense among Bangladeshi companies that people can get away without paying back their loans.<\/strong> That, in turn, poses a threat to the wider economy and a banking system that is already overwhelmed with defaults.<\/p>\n\n\n\n

The central bank, meanwhile, says that the policy will help revive lending growth in an economy that is dependent on attracting investment to sustain growth.<\/strong> Asian Development Bank predicts that the country’s economy will expand 8% over the next two years.<\/p>\n\n\n\n

Shitangshu Kumar Sur Chowdhury, banking reforms adviser at Bangladesh Bank said:<\/p>\n\n\n\n

 \u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Bangladesh’s Central Bank Offers Amnesty To Delinquent Borrowers, Prompting Mass Default Bangladesh’s Central Bank in May introduced an amnesty program that allowed delinquent borrowers to make a small upfront payment and then pay off the rest of their debt over 10 years at favorable interest rates, according to Bloomberg. However, the plan also triggered a rush by healthy […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[26628,26627,1361,83,195,26629,6559,4318],"class_list":["post-48057","post","type-post","status-publish","format-standard","hentry","category-economics","tag-amnesty","tag-bangladesh-central-bank","tag-bankruptcy","tag-bloomberg","tag-debt","tag-mass-default","tag-non-performing-loans","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48057","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48057"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48057\/revisions"}],"predecessor-version":[{"id":48058,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48057\/revisions\/48058"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48057"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48057"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48057"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}