Business leaders seek default classification after 6 months of overdue, lending rates cut to 12%
They urge financing struggling industries, not closed factories.
Business leaders have demanded that overdue loans be classified as defaults after six months instead of three months. They also called for bank lending rates to be reduced to 11%-12%.
The demands were placed today (12 May) during a meeting with Bangladesh Bank Governor Md Mostaqur Rahman, led by Bangladesh Chamber of Industries President Anwar Alam Chowdhury and an 18-member delegation.
Under current rules, a loan becomes overdue if not repaid within the stipulated period. If the unpaid loan remains unsettled for 90 days, it is classified as defaulted.
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In 2024, following several rounds of discussions with the World Bank and the International Monetary Fund (IMF), the central bank reduced the overdue loan period from six months to three months as part of its non-performing loan policy reforms. Since then, loans overdue for more than three months have been shown as defaulted. Business leaders now want the period restored to six months.
They also said current bank lending rates of 14%-15% have made it extremely difficult to run businesses with borrowed funds. They urged authorities to keep lending rates within 11%-12%.
The leaders said the country's production sector is under severe stress due to high interest rates, gas shortages, dollar pressure and weaker market demand. Instead of financing factories that have already closed, they said support should be directed to weak but still-operational industries to protect production and jobs.
Speaking to the media after the meeting, BCI President Anwar Alam Chowdhury Parvez said they had sought working capital support, lower lending rates, reduced penal interest and expanded foreign refinancing facilities to keep industries running.
He said the industrial sector has faced a shortage of working capital since the post-Covid period. Later, falling gas pressure, higher interest rates, currency depreciation and high inflation made the situation more complex.
He added that the current government also believes the industrial sector must survive if the economy is to be strengthened. Based on that understanding, business leaders placed several proposals before the governor to help existing factories remain operational and become stronger.
Business leaders also demanded relaxation of complications related to LC limits. They proposed blocking only the portion that exceeds the limit while keeping the original limit active to facilitate business operations.
They also requested increased foreign funding and refinancing facilities so businesses can access cheaper finance and lower costs.
On lending rates, Anwar Alam Chowdhury Parvez said banks' cost of funds is not more than 8%-10%, yet additional spreads are pushing lending rates to 14%-15%. He said the government could reduce those spreads to provide some relief to industries.
He further said imposing extra penal interest after a loan becomes defaulted creates major pressure on industries. Rather than punishing factories, authorities should create an environment that enables them to repay loans.
Business leaders also raised objections to the "group concept" in CIB reports. They said multiple companies are often treated as one group because they share the same directors. As a result, if one company faces problems, other healthy firms also suffer due to negative CIB reports. They demanded that each company be assessed separately.
Parvez said MSME financing was also discussed with the governor.
He said banks are reluctant to finance small and medium entrepreneurs. Business leaders also demanded simpler compliance processes, introduction of venture capital and access to low-interest loans.
According to him, Bangladesh Bank listened positively to their proposals. The governor said work is underway on working capital, foreign refinancing and penal interest issues, and some decisions may come soon.
Parvez said their goal is simple: factories must be saved. Once a factory closes, reopening it becomes extremely difficult. Therefore, industries that are still running need urgent support.
He added that many factories are in trouble due to gas shortages, gas price increases of up to 286%, high interest rates and political instability. Industry is not just private wealth, he said – it is a national asset. Promising industries therefore need special government support.
Regarding funding support, Parvez said the governor informed them that steps had been taken to release export cash incentives up to April. He also noted that the need for wage support for garment workers has now declined.
Finally, he said business leaders were reassured that under the current governor's leadership, Bangladesh Bank is sincere about protecting the industrial sector.
