The new Bangladesh Bank directive on loans will compel many businesses to default and slow down export growth, the Exporters Association of Bangladesh (EAB) said yesterday.

“Such a move will only add to the woes of the already troubled export sector. Plus, it will put a damper on investments in the country,” said Abdus Salam Murshedy, president of the association.

The central bank's new rule, which comes into effect from July 1, states ongoing loan operations are to be classified as bad loans within three months of non-payment of an installment, instead of the six-month timescale currently in place.

EAB urged the central bank not to keep any specific time frame for loan repayment. aAnother rule which takes effect from July 1 narrows down the bank rescheduling period from six months to three.

Only exporters facing a massive stocklot are allowed rescheduling after the expiry of the three-month deadline at a 7.5 percent down payment.

EAP asked for bank loan rescheduling facility to be extended to all beyond the three-month timescale, for the greater interest of country's export and industrial growth.

The body added that the Bangladesh Bank move will eat into the profitability of private commercial banks, thanks to the increasing number of defaulters.

Anwar-ul-Alam Chowdhury Parvez, a former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), also expressed his concern over the new rules' impact on the export sector.

He cited examples of India and Malaysia, where the loan rescheduling period enjoyed is 12 months and 6 months respectively. “If the new circulars materialise, about 60 percent of the industry will be classified and banks will register more than 50 percent loss in profits,” Parvez added.

The Daily Star/Bangladesh/ 29th June 2012