Financial Institutions Division has recommended five measures, including regular disclosure of identity of big loan defaulters for quickening loan recovery by the state-owned commercial banks while experts are sceptic about successful implementation of the recommendations.
Its officials said that the state-owned banks would publish the identity of the defaulters on their web page, notice boards and or any visible place like newspapers in line with the suggestions so that general people could know them.
On April 3, the division made the recommendations after examining those for seven months as widespread loan scams, growing bad loans and hostile takeover of private banks sent the banking sector into worst-ever situation.
The recommendations include establishment of cells in Bangladesh Bank and state-owned banks to monitor defaulted loans over Tk 100 crore and constitution of a separate High Court bench for speedy disposal of writs against loan ecovery.
The division recommended incentive for bankers for recovering defaulted loans and review of their performance in every three-month by the state-owned banks.
Division secretary Eunusur Rahman said that the recommendations were prepared from suggestions given by policymakers, bankers, banking experts and bureaucrats at a seminar in August 2017.
The loan recovery rate would increase if the short-term recommendations are implemented in three months, he said.
Eight state-owned banks, 40 private sector banks and nine foreign banks have non-performing loans of Tk 80,397 crore or 10.67 per cent of the total outstanding loans as of September 2017, much higher than bad loans of 2 per cent in Nepal and 7 per cent in India.
Bad loans of the six state-owned banks – Sonali, Janata, Agrani, Rupali, BASIC and BDBL – stood at Tk 38,517 crore because of few wilful defaulters backed by politicians, division officials said.
According to a paper, A Review of the Activities and Performance of the Banking Sector of Bangladesh, presented at a seminar of Regional Banking Conference in Dhaka in March, the bad loan would rise to 17 per cent of outstanding loans if rescheduled or restructured loans are included.
Experts welcomed the recommendations as the state-owned banks were in desperate need to recover bad loans from the defaulters to protect the interest of depositors accounting 90 per cent of the fund of the banks and check their chronic losses.
They, however, doubted successful implementation of the recommendations because of lack of political will of the ruling party whose back-to-back five-year tenure, as they said, would be considered as the worst decade for the banking sector because of series of loan scams, theft from the central bank’s reserve and issuance of banking licences on political consideration.
Former Bangladesh Bank deputy governor Ibrahim Khaled noted that the provision for publication of names of defaulted borrowers stipulated in the Bank Company Act 1991was never enforced by the Bangladesh Bank.
A finance ministry proposal for the constitution of a separate High Court bench speedy disposal of writs against loan recovery remained unaddressed by the law ministry, he said.
Recovery of credit of Tk 45,135 crore by state-owned banks remained blocked for decades because of 4,250 writ petitions filed by the errant borrowers against cases filed by state-owned Sonali Bank, Agrani Bank, Janata Bank and Rupali Bank until 2016.
Centre for Policy Dialogue distinguished fellow Mustafizur Rahman said that the series of loan scams in the state-owned banks, including embezzlement of Tk 1,200 crore by Bismillah Group from Janata Bank, Tk 3,500 crore loan scam by Hallmark Group in Sonali Bank and Tk 6,000 crore fictitious loan extended by previous board of directors led by politically appointed chairman Sheikh Abdul Hye Bacchu of BASIC Bank raised question about central bank’s role as a regulator.
Former Bangladesh Bank governor Salehuddin Ahmed said that the central bank should be proactive to check the irregularities.
He noted sadly that the central bank bowed down to the pressure from the government and reduced cash reserve requirement of commercial banks to 5.5 per cent of their deposits from the existing 6.5 per cent on April 4.
The measure, according to him, weakened the safeguard of depositors maintained by the central bank and created scopes for more loan scams and capital flight in the crucial election year.
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