Banks aren’t capable to recover default loans

Mahfuja Mukul: The total amount of defaulted loans in Bangladesh is Tk1 lakh 183 crores.
Finance Minister Aham Mustafa Kamal disclosed the list of top 300 defaulting institutions of Bangladesh in the Parliament few months ago, in whose hands about Tk 51 thousand crore are stuck.
Meanwhile, the amount of defaulted loans has been increasing for the past few years.
According to Central Bank calculations, defaulted loans have quadrupled in the last 10 years.
Why not possible to recover debt?
The executive director of the private research organization Center for Policy Dialogue Fahmida Khatun thinks that due to the government’s flexible policy in recovering defaulted loans, the debt is not recovered.Those who default are politically and socially influential, or their contacts with influential people.
Now the culture stands that people take loans without knowing they will pay them back. As a result, I think, due to the lack of effective measures to recover these defaulted loans, it is not being recovered.”
He thinks that the opportunity of debt rescheduling that the government gives year after year to recover defaulted loans has not been of much use. Rather it has been like a reward rather than a punishment for them.
For example, on May 16, the Central Bank of Bangladesh issued a special policy, where it is said that the loan can be rescheduled if two percent of the outstanding loan is deposited. After one year without paying the loan, the remaining money must be returned within 10 years.
According to this policy, the cases filed by the bank against the defaulters have also been suspended.
However, the High Court has given a status quo on this principle.
What BB doing to recover defaulted loans?
Central Bank Executive Director and Spokesperson Sirajul Islam said that Bangladesh Bank has regularly sent instructions to state-owned and commercial banks for debt collection, but not all of them follow it.
“We send regular instructions. There are even policies for rescheduling. Besides, every bank has its own rules for taking other legal actions.”
Mr. Islam said that the central bank has formed a committee in the first week of June this year to find the reasons for the increase in defaulted loans and to reduce the defaulted loans.
Besides, the managing directors of some banks have been asked to know the reasons for the increase in defaulted loans.
What money can be recovered at all?
Many analysts believe that if the government does not take strict measures, it will never be possible to recover this huge amount.
Because there is no instance of any strict penal action being taken against any defaulter in debt recovery.
At least Bangladesh Bank spokesperson Mr. Islam could not give any such example.
As a result, there is no hope of recovering the money if strict punitive measures are not taken according to the law, says the former deputy governor of Bangladesh Bank, Khondkar Ibrahim Khaled.
“Last year also a list of one hundred persons was presented in the parliament, no action was taken against them, and the money was not recovered. But this time if the members of parliament take an initiative to inform what action has been taken against them in the next financial year, then maybe there will be a result. Will see.”
“We have not seen any action against major defaulters before, so it is not immediately possible to say what will happen this time.”
Frustrated small entrepreneurs
After knowing the list of 300 defaulting individuals and institutions of Bangladesh by Finance Minister Aham Mustafa Kamal in the National Parliament, many small entrepreneurs expressed their disappointment.
Taslima Mizi Bahni, an entrepreneur in the leather industry, says that small entrepreneurs will be discouraged after knowing the amount of defaulted loans.
“When small entrepreneurs go for loans, banks don’t give us loans. We have a proper plan of action, a history of repaying loans on time, but banks don’t give us loans. They give loans to people who take billions and don’t pay back.”
The total amount of defaulted loans in Bangladesh is about a quarter of the national budget of Bangladesh.