Culture of default loans in BD
Currently, there is an intolerable and toxic environment existing in banking sector. A much flourished and stable sector is now in miserable condition where indiscipline and loan default culture are reigning. This loan default culture is turning our financial sector in grave risk and the aftermath would be terrible and beyond control.
Much efforts and grace in different ways to realize the loans have been extended by the concerned banks and government authorities to the defaulters but no positive signs and attitude are being observed so far.
Moreover, gradually the amount of default loan is increasing and the sector is floating. An ocean of default loan is created by a section of corrupted, greedy and overambitious people who later emerged into businessmen. It is obviously shocking to write that 300 top defaulters have been named in parliament by the honorable Finance Minister AHM Mostafa Kamal. These, 300 top loan defaulters owe an amount of BDT 50,942 crores with different banks and financial institutes. In addition there are 14,617 individuals who borrowed BDT 50 million each from different banks , financial and leasing institutes without any repayment , since 2009 . Over and above the amount of NPLs -nonperforming loans is around BDT 94,000 crore at the end of December, 2018 .
Literally , depositors are the owners of banks but in contrast of the present prevailing situation and indiscipline in banking sector, loan defaulters turned into the owners of a bank in collaboration with few inefficient and corrupted bankers who are entrusted by the state to sanction the loan to a right , prospective and deserving businessman or business group.
On the top political influence, constant political pressure and intervention to sanction loans to a particular person, friends, relatives or business group is one of the most common reasons of developing the bad culture of loan default. We all must keep in mind that any sort of loan being borrowed from banks, financial institutes or leasing companies is not a personal liability if embraced loan default. It is a National liability and so the word LOAN-Liabilities of A Nation .
To flourish a business in large scale and capturing a prospective market in competitive business environment, locally or globally loan is required. Without loan, it is somewhat impossible nowadays to run a business smoothly on personal capital and investment . On the other hand, the banks, financial institutes and leasing companies perform banking function on interest based operation. As such they need clients for lending money to survive, establish and explore their business.
Lending money is not an offence for a financial institute .The offence lies in choosing the right and trusted client who would return the borrowed amount as per agreed terms and conditions of bank after successful utilization in his business within scheduled time . It is shocking to write that in most of the cases of default, loans are sanctioned to a wrong client / group may be due to inefficient bankers constant pressure of bureaucrats , high-ups and politicians .
Meantime , Bangladesh Bank - the supervising authority of all banks and financial institutes cannot avoid their responsibility in occurring a default loan . The birth of a defaulter is the cumulative negligence rather failure of the concerned bank and Bangladesh Bank in addition to law of the soil which is not strong enough to deal and punish the defaulters instantly .
It may be mentioned that in the year 1992 , Bangladesh Bank established CIB - credit information bureau , with the only objective of monitoring the extent of default credit .Moreover , credit related information of clients are stored and maintained in bank's database for future needs and a means of awareness about repayment behavior of the client and default . It is the fundamental responsibility rather obligation of CIB to adopt preventive and precautionary measures well in advance before any single mishap , incident or accident would happen in any bank , in any branch anywhere under her kind control . Instead of being active and aggressive to defend the money belonging to the poor depositors of the republic and the state they are somewhat indifferent in executing and exercising their responsibilities . If not why the amount of default loan is Tk= 50,942 crores with top 300 defaulters , amount of NPLs is TKm 94,000 crore , in addition to 14,617 individuals , who borrowed 50 million taka each from different banks and financial institutes.
We believe, none would be able to come out with a honest, bold and sharp reply , true findings because of their self-created and secret alliance with these defaulters and seasonal businessmen . Defaulters are not only gambling with borrowed money, they have turned banking and financial sectors into a realm of corruption and possible disaster.
However, it is highly appreciable that Bangladesh Bank has formed high profile committees to reform the ailing banking sector in a bid to reduce default loans and take necessary action against willful defaulters. It may hurt someone but the hard truth is that, the Defaulters are much stronger and astute than the banking and concerned authorities, reasons behind best know to everyone. If really, we want to reform this ailing sector we have no other alternative in hand except going hard and harsh with defaulters and their secret associates thus ignoring his or her personal, social and political identity. In conclusion, we furnish our ideas as follows -
1. All banks , financial institutes and leasing / lending companies must be cent percent free of politics , political and bureaucratic influence and recommended.
2. Politicians turned businessmen or businessmen turned politicians, M/Ds, Directors and Advisors of Bank should not be encouraged for commercial loans beyond refundable capacity.
3. Loan applications must be examined honestly by the concerned bank and central bank based on merit , personal & business reputation , transaction profile of the individual at least for a period of 5 years ,
4. Collateral security / mortgaged properties must be thoroughly and cross examined by reputed firms to avoid any sort of counterfeit documentation and over valuation .
5. Strong professional and pragmatic supervision both by concerned bank and central bank must be conducted round the year to avoid any sort of mishap , accident and injury to public money.
6. Not only the borrower but the related authorities should be held responsible for any sort of professional or supervisory negligence .
7. There should be a strong , impartial and fast-track judiciary to deal with financial matters and defaulters .
8. To reduce the constant culture and growth of default loan , lending rate must come to a single digit in order to encourage the borrowers to pay uninterrupted loan installments . Under the prevailing situation it is too tough to run a business , based on 2 digits interest rate .
9. Strict banking measures should be adopted to prevent the transfer or diversification of the borrowed fund elsewhere or abroad by over invoicing or money laundering procedure.
10. All Banks and financial institutes must publish a list of their defaulters every year in most circulated daily newspapers as a prime source of awareness build up among all and a mean of disgrace to defaulters .
As per available information, there are 6 state owned banks , 3 specialized banks and 41 private commercial banks operating in Bangladesh . More or less, most of the banks are overburdened with financial indiscipline and a bad culture of loan default is prevailing especially in the state owned banks. In a broad sense, in terms of economy and financial exposure too many banks are not required at present. If the central bank being the custodian of all banks and financial institutes, takes urgent collective steps merging the banks then this important sector can be saved from loan default culture and massive indiscipline. If we fail to do so then the whole economy and progress may suffer very awfully.
The writer is a Freelance Contributor