The High Court Division in a supplementary rule on Tuesday directed the government and the Bangladesh Bank to explain in 10 days why rescheduling defaulters’ loans on two per cent down payment would not be declared as illegal.
The Appellate Division on July 8 had stayed HC’s May 21 order in which the government and BB were asked to maintain status quo on the issue.
The Appellate Division had also directed all the banks not to provide new loans to the defaulters for next two months.
Financial experts described rescheduling big loans of wilful defaulters and sending farmers to jail for defaulting small loans as ‘discriminatory’.
They said that most of the defaulters were banks’ directors as well as ruling party politicians.
Tuesday’s supplementary ruling was issued by a bench of Justice JBM Hassan and Justice Md Khairul Alam after hearing a supplementary writ petition of Human Rights and Peace for Bangladesh.
The bench also set August 31 to hear the original rule in which the government and BB was directed to explain why they would not be directed to form an independent commission to identify loan defaulters and money launderers.
The original ruling issued by a bench led by Justice FRM Nazmul Ahasan had directed the BB and the government to explain why they would not take action against the defaulters and money launderers.
On February 13, the original ruling was issued after hearing HRPB’s writ petition.
On July 8, the Appellate Division ordered hearing the rule by a bench led by Justice JBM Hassan instead of the bench led by Justice FRM Nazmul Ahasan.
Following the government’s appeal, the Appellate Division had also stayed for two months, the status quo imposed by the High Court Division on rescheduling defaulters’ loans.
At the HC hearing, BB had informed the court that the total defaulted bank loans amounted to Tk 2.2 lakh crore, of which 1.1 lakh crore was recoverable but Tk 30,000 crore was not recoverable.
Earlier, finance minister AHM Mustafa Kamal informed Parliament that 300 top loan defaulters owed bad loans to the tune of Tk 50,942 crore to banks and financial institutions.
The finance minister also informed Parliament that in 2018, state run commercial and specialised banks waived interests on loans to the tune of Tk 1,198.24 crore to be repaid by 6,163 borrowers.
The finance minister also informed Parliament that 300 business entities defaulted on repaying loans amounting to Tk 50,942 crore while the total outstanding loans stood at Tk 70,571 crore until April.
The Awami League government after taking power for the third consecutive term in January made a number of concessions to the loan defaulters, like relaxing the rules for repayment of defaulted loan and extending the time for treating overdue defaulted loans as doubtful and bad loans, in April.
The central bank in February relaxed the loan write-off policy empowering banks to write off loans worth Tk 2 lakh. Previously the limit was Tk 50,000.
The country’s banking sector faced series of loan scams and irregularities over the past 10 years and in the latest one Padma Bank, formerly the Farmers Bank’s scams came to the surface.
Amid growing public distrust in the country’s banking sector, majority of the financial institutions including banks and non-bank financial institutions are facing severe liquidity crisis.
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