Banks have been struggling to recover loans despite disposal of a large number of cases involving substantial claims, leaving the banks in a conundrum.
The country's financial institutions resorted to filing cases in the Artha Rin Adalat (money loan court) to recover the bad loans, but even with legal actions, retrieving the funds has proven to be an uphill battle.
As of June 2023, a total of 1,55,888 cases involving Tk 92,212 crore in claims were resolved. However, banks could not recover nearly half of the sum, with only Tk 23,329 crore recouped by the end of June.
In January-December 2022, about 1,50,159 cases were settled, with claims totalling Tk 82,297 crore. A mere Tk 21,082 crore was recovered from these claims.
Financial sector experts said that reclaiming defaulted loans had become a formidable challenge, as borrowers frequently sought legal protection against default status. The habitual filing of writs by defaulters has further hampered the loan recovery process, resulting in a substantial backlog of unresolved cases, they said.
Established in 2003, the money loan court, known as the Artha Rin Adalat, were designed for swift dispute resolution concerning loan repayments, but the court has become burdened with financial litigations, they said.
Since its inception, the court has seen 2,28,428 cases involving Tk 2,70,489 crore filed till June 2023. By December 2022, outstanding claims totalled Tk 2,49,184 crore from 2,22,348 pending cases.
This indicates an increase of 6,080 cases and Tk 21,305 crore in claims within a span of six months. Presently, the money loan court is faced with 72,540 ongoing cases, with claims amounting to Tk 1,78,277 crore.
In comparison, December saw 72,189 ongoing cases with claims totalling Tk 1,66,887 crore. It marked a rise of 351 pending cases and a surge of Tk 11,390 crore in claims within the same six-month period.
Six state-owned commercial banks were entangled in 14,480 pending cases involving Tk 75,973 crore in defaulted loans.
Banks initiate lawsuits in lower courts to reclaim defaulted loans, but borrowers respond by filing writs with the High Court to contest the trial court rulings, bankers said. Moreover, writ petitioners often obtain stay orders, allowing them to delay immediate payment to lenders, they said.
The number of unresolved cases has also been rising due to a rise in loan scams, lenient approaches to recovering bad loans, a shortage of money loan courts and judges and delayed legal proceedings, financial sector experts said.
Currently, there are 61 banks operating in the country. While the Bangladesh Bank has introduced various special facilities, such as loan rescheduling and one-time exit options for defaulters, the borrowers were not making repayments, leading to a continued rise in bad loans, financial experts said.
The amount of money stuck in the court cases is more than the total amount of defaulted loans suffered by the financial institutions so far. The total distressed assets in the country's banking sector reached Tk 3,77,922 crore excluding loans that were unclassified by court orders.
The amount of rescheduled loans in the country's banking sector soared to Tk 2,12,780 crore at the end of 2022 amid relaxed rescheduling facilities by the Bangladesh Bank.
The amount of defaulted loans soared from Tk 1,20,656 crore at the end of December 2022 to Tk 1,31,620 crore at the end of March 2023. The net outstanding balance of written off loans stood at Tk 44,493 crore.
