So yes, some interests can also be written-off due to catastrophic circumstances like the Covid-19 pandemic. But in most cases, the defaulters are usually rich individuals who can afford to pay back their debt, but simply do not or will not.
State-owned banks also write loans off
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They take loans, they default and launder the money abroad. Bangladesh’s GDP was $9 billion in 1972. It is now $416 billion.
But the tax revenue from this large sum is not increasing. We have one of the lowest tax-GDP ratios in the world.
I will not play a blame game here. Our society, the government, the revenue collecting authorities and those who can pay taxes but do not, are all to be held responsible.
There are three different types of exchange rates in our country. The lowest exchange rate is for importers and the general populace. The second rate is for exporters, who receive cash incentives ranging from 1-20 percent.
As I have already said, loans can become unrecoverable due to especially hard circumstances like a pandemic, natural disaster or a global economic depression
Then there is a rate for expats who send remittances to our country as they get a 2.5 percent cash incentive. So, in some instances, launderers can just send laundered money from abroad, make their wealth appear legitimate and receive a handy cash increase in the process.
As long as such opportunities are available, defaulters and launderers will use them to increase their wealth and create problems for the rest of us. Because when borrowers default on loans and banks write those loans off, they have to increase the interest rate for other borrowers or have to decrease the interest rate for their depositors.
See, that is the problem with the media. They only focus on government organisations while ignoring the failures of private entitiesmercial banks are responsible for the most amount of loan write-offs. But the media will still focus on state owned banks.
Private banks have formed a formidable pressure group which they use to retain dividends for themselves and their owners while writing-off bad debt. The main focus should be on them.
Yes, it should. But that does not happen because state-owned banks are portrayed in the media as corrupt and inefficient. So, people https://worldpaydayloans.com/payday-loans-md/ do not have any other alternatives, even though state-owned banks provide their depositors with higher interest rates on their savings.
The government also that the interest rate from savings certificates are too high and lowered them. It created a lot of problems for lower-middle class and middle-class families, especially retired government employees and other pensioners.
This measure further limited the options available for saving for the general populace. So people have no other option than to deposit their earnings in private banks, even though they are not demonstrating good business practises.
Bangladesh Bank sometimes takes good initiatives like the cancellation of NBFI cheque books. Last year also, they demanded that the full scheduled payments are made by the borrowers to keep their loans as performing.
But the government pressurised Bangladesh Bank and then they decided that one can avoid the defaulted status by only paying 20 percent of loan instalments. So Bangladesh Bank is probably just not assertive enough; it probably does not have stubborn people like us.
From 1996, we maintained a list of large defaulters. The then governor, Lutfar Rahman Sarkar, was attacked on an open street regarding this. People of this country know about it only because it made headlines at the time. We filed cases against the biggest defaulters and even the most influential of them had to stand before the courts.