On 31 August, Bangladesh Bank issued a circular allowing defaulted borrowers with exposures of 1,000 crore taka or more to reschedule their loans over 15 years, including a two-year grace period, with the facility open until December 31, 2026. Smaller defaulters remain on the standard 10-year track. The central bank framed the move as part of its 18-month roadmap to bring down non-performing loans, citing export headwinds from the Middle East conflict, fuel shortages that have hollowed out production capacity, and the rising cost of borrowing.
For defaulting corporates this is much-needed breathing space: time to reorganise their financial health, keep factories running, protect jobs, and keep the wheels of business turning while the country works its way through a gas and fuel crisis that will realistically take three to five years to resolve.
The reaction has been predictably loud. Bangladesh Bank stands accused of rewarding defaulters while borrowers who repay on time, whatever the size of their loans, get nothing. The criticism is understandable. It is also aimed at the wrong target.
Consider a parent who, absorbed in work and career, never found the time to raise a child properly, and then at age ten hands that child over to a correction home expecting a magical turnaround. The expectation is impossible from the start. The problem was not created at the correction home, and it cannot be fixed there.
Bangladesh Bank is the correction home in this story. The banks that made these loans are the parent. Every lender in this country, local or foreign, should be using this moment not to complain about the regulator but to take a hard look at its own credit risk management.
The largest single root cause of corporate default in Bangladesh is not the business cycle. It is fund diversion.
The pattern is familiar to anyone who has sat on either side of a large credit committee. A large borrower raises debt against a running, cash-generating business. The borrowed capital is then diverted into a new venture in which the promoter has no background, no track record, and, crucially, no equity of their own. With no skin in the game, borrowed money becomes the seed capital of the new venture, carrying double-digit interest that compounds quarterly. When the venture stalls, as ventures run by people with no experience in them usually do, the original business is dragged into default along with it.
This is a failure of lending discipline before it is a failure of borrower character. It can be caught, and it can be prevented, but only by banks that are organised to do so. That means:
Continuous risk analysis, not a one-time appraisal at sanction followed by silence until the first missed instalment.
Adequate collateralisation of every approved facility, valued realistically and re-valued periodically.
An organisational set-up that monitors the borrower's actual operations, benchmarking performance against peer groups in the same sector, so that a decline shows up in the data before it shows up in the arrears.
Independence from management accounts prepared by the borrower. Numbers customised by a promoter, especially one who is already seeking easier terms, are a starting point for verification, not a substitute for it.
Oversight of this kind is what minimises diversion. Where it is absent, no amount of regulatory forbearance or regulatory severity will produce healthy loan books.
Set the bank-side reforms aside for a moment and look at the environment in which this decision was taken. High inflation spooked by high energy prices. Natural calamities across the border in Nepal constraining electricity supply. Our own gas reserves depleting, with new supply requiring time we do not have. This is among the most difficult global situations in living memory, and Bangladesh is navigating it with fewer buffers than most.
Against that backdrop, Bangladesh has one asset almost no one else has: a population approaching 190 million, roughly two-thirds of it of working age and ready to go to work every day, flexible enough to take up industrial employment at a time when workers in India and Vietnam have become increasingly selective about where and how they work. That workforce is only an asset if there are factories for it to walk into. A defaulting corporate that is liquidated is not a moral victory; it is a shuttered plant and a payroll that stops.
Seen this way, Bangladesh Bank's easier repayment terms are not weakness. They are a courageous piece of firm handholding to get the productive economy across the cyclones and the rocky roads ahead. The defaulting corporates, and their bankers, should not read this gesture as generosity born of weakness, but a Prime Minister with his rolled-up sleeves ready to partner standing beside them in their most difficult hour, with the expectation that they use the time well.
We loudly applaud this gesture of Honourable Prime Minister Tarique Rahman as part of his Vision 2034 to build a trillion-dollar economy. It sits alongside the 60,000 crore taka production and employment revival package announced in May to reopen closed and suspended industrial units and create some 25 lakh jobs, a visionary intervention to jump-start the economy even as the Prime Minister steers the nation through financial, energy and geopolitical challenges toward prosperity.
Kudos to his ability to see Bangladesh's prosperity beyond crisis after crisis. This is the honest, relentless, tireless leadership we have been waiting for. In him I see semblances of the late Lee Kuan Yew, founder and leader of modern Singapore, and the thought that Bangladesh could become the Singapore of South Asia no longer feels like a distant dream. Ameen.
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Anis Ahmed is the Founder and Group CEO of MGH Group, a Multinational conglomerate with interests in logistics, Aviation, Mobility, fintech, media and infrastructure.