Bangladesh Bank is offering another round of loan restructuring to business owners who have defaulted on their bank loans, providing an opportunity to regularize debts under a special central bank authority.

The central bank has approved restructuring for about 280 firms, while more than a thousand additional applications are still under review. Typically, defaulting companies cannot renew their loans by making a deposit. Under this special concession, however, firms are being given a chance to restructure their debts. Only companies with outstanding loans exceeding Tk 500 million are eligible, and a selection committee was formed earlier this year to oversee the process.

According to Bangladesh Bank sources, many beneficiaries were affected during the tenure of the previous Awami League government, while others struggled during the Covid-19 pandemic or faced challenges due to the dollar crisis. Some firms granted the facility have faced prior allegations of loan irregularities, and certain companies are even receiving restructuring for loans they had previously restructured. The total amount of loans approved for restructuring has not yet been disclosed.

The facility will take effect once borrowers deposit the required amount, after which individual banks will implement the restructuring. Some borrowers, particularly those preparing for elections, have already renewed their loans. Banking insiders note that the special restructuring has, in some cases, encouraged previously sound firms to delay repayments, affecting bank liquidity and contributing to higher interest rates.

Bangladesh Bank Executive Director Arif Hossain Khan told Prothom Alo: “We have instructed banks to provide special policy support to 280 companies affected by Covid-19, the dollar price surge, and political circumstances. Additional applications are still being reviewed, which will help revive business activity.”

Major Beneficiaries
Among the approved firms, Bangladesh Bank has restructured nearly Tk 30 billion in loans for four companies under the Energypac Group, involving 28 banks and financial institutions. Humayun Rashid, Managing Director of Energypac Power Generation, said their loans had gone bad due to Covid-19, the dollar crisis, and delayed government payments, and the restructuring now provides an opportunity to recover and expand business.

Other firms receiving restructuring include Buildtrade Group and its affiliates (loans totaling nearly Tk 40 billion), Virgo Media (Channel Nine), Sourab Group, Ershad Group, Blue Planet Group’s Palace Resort, Sky Capital, and Badar Spinning Mills. The list also features Western Engineering, Bengal Group’s Bengal Plastic, Abdul Monem Group, Orion Group, Deshbandhu Group, Opex Sinha, Tanaka Group, Gazi Group, Dandy Dyeing Limited, Rising Steel, Sabab Fabrics, One Denim, Fair Electronics, Ifad Group, Ambient Steel (BD), GPH Ispat, Prime Group, Anwar Group, Silkways Group, Diamond Spinning Mills, Mim Group, SMA Group, BUC Agro, Bling Leather Products, Apex Weaving, and Ankur Specialized Cold Storage.

Not all companies in these groups are defaulters; in some cases, only specific subsidiaries are involved. Bangladesh Bank has sent letters to the respective banks, instructing them to provide restructuring facilities to eligible borrowers.

Restructuring Terms and Concerns
Under normal policy, defaulted loans require a one-time deposit of at least 4.5% of the outstanding amount, a grace period of up to one year, and repayment over seven years. The special restructuring allows a down payment of only 1%, a grace period of up to three years, and repayment over 5–15 years.

While some bankers argue that the measure helps recover funds from chronic defaulters and improves liquidity, others express concern that long repayment terms may strain bank finances. Sheikh Mohammad Maroof, ABB Treasurer and Dhaka Bank Managing Director, said, “For genuinely affected firms like Gazi Group, this makes sense. But applying it to older issues such as the Covid-19 and dollar crises may not have been necessary, and 15-year repayment terms could affect liquidity management.”

Rising Defaults and Economic Context
Defaulted loans in Bangladesh’s banking sector have surged in recent years. As of June 2024, defaulted loans totaled Tk 5.3 trillion—about 27% of all outstanding loans, up from Tk 4.2 trillion at the end of March. Much of this increase occurred among loans issued during the previous government’s tenure and due to the current economic slowdown.

Bankers stress that while restructuring can temporarily reduce defaults, sustained economic growth and a healthy business environment are essential to prevent loans from going bad again. Former ABB Chairman Syed Mahbubur Rahman noted that current restructuring approvals are more systematic than in the past, with audits and evaluations conducted before implementation, though concerns remain about recovery under long-term repayment plans.