Tk 70,000cr Lawyers’ Fees
Banks recovered Tk 13,400 crore default loans in 2018
Recovery of default loans is not making any significant progress despite large number of cases were filed by concerned banks and big amount of money spent every year to pay lawyers' fees and other legal expenses.
A senior Bangladesh Bank (BB) official said legal loopholes are mainly responsible to allow the defaulters to avoid timely payment of loan installments. Needless to say political shelter to big borrowers and bank officials' help to borrowers as retainers inside the bank are helping the situation only to aggravate.
A statement released by Bangladesh Bank recently said banks have so far around 2,55,000 cases pending in different courts to recover over Tk 2,00,000 crore. But banks were able to recover Tk 13,400 crore in 2018, which was only 6 percent of the total outstanding loan.
But banks were to spend Tk 70,000 crore last year to maintain lawyers and pay other legal fees. It sounds ridiculous but BB's statement made the claim to raise the eyebrow in many quarters.
Of the total cases, more than 1,57,000 were filed to recover the agriculture loans of different banks including Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank while its amount of default loans were only Tk 533 crore.
The figure in the statement further showed around 98,000 cases were lodged to recover Tk 199,500 crore loans, mainly industrial loans including textiles, readymade garments and small and medium enterprises (SME) sector.
The available figures suggest banks loan recovery efforts now more look like a different business in the sideline involving huge payment of money than any significant benefits banks are getting in term of loan recovery.
The statement suggests the rate of recovery is very poor. Despite several initiatives by the central bank and individual banks, default loans are not coming down. It blames factors like non-cooperation of borrowers and connivance of a section of bank officials with defaulters to push such recovery drive to failure.
Although recovery by private banks is closer to their target, though the figures are not too big, recovery by public sector banks remains too poor, according to BB's the statement.
The BB officials however mainly blame loopholes in existing laws. Moreover many banks have sanctioned more than one loan against a single property mortgage which is not only insufficient in valuation but many borrowers now no longer traceable.
A section of bank officials and even board members are helping borrowers passing sensitive information and suggesting ways how to defeat loan recovery drive. The relation between many public sector bankers and lawyers is now based on how to prolong cases and mutually benefit.
Bangladesh Bank Executive Director Sirajul Islam told the Daily Observer that Bangladesh Bank has taken several initiatives to recover default loans faster. But, the existing law never supports speedy recovery.
Considering situation, the BB has taken steps to amend the laws. Concerned BB officials have already held meetings in this regard. They are working to finalize a draft for new law at this moment.