BB steps in to clear backlog of cases

The central bank has agreed to sit with the Law Commission after top bankers called for steps to bail banks out of a huge backlog of court cases related to nonperforming loans.

Bangladesh Bank took the decision yesterday at a quarterly meeting with the Association of Bankers, Bangladesh (ABB), a forum of the managing directors of banks, at the BB headquarters.

"We will sit with the Law Commission within the shortest possible time and request it to take prompt measures to settle pending cases, both with the High Court and lower courts," SK Sur Chowdhury, banking reform adviser of the central bank, told reporters after the meeting.

The chief executives of all banks will be present at the meeting with the Law Commission, sources said. 

As of June 2018, more than 55,500 cases involving Tk 75,000 crore in default loans are pending with the courts, according to BB data. The rising NPL also concerned BB Governor Fazle Kabir. He asked bankers to bring down the NPL to 10 percent by intensifying recovery efforts.

Data showed NPL increased to Tk 99,370 crore, which is 11.45 percent of the outstanding loans in September this year, up from 10.41 percent in June.

The amount will be much higher if loans written-off and rescheduled are taken into account, according to bankers.

Syed Mahbubur Rahman, chairman of ABB, said it would be a challenging task to cut NPL without resolving the court cases.

"A large amount of the loans is stuck in the legal battles. Habitual defaulters filed writ petitions with the courts in effort to avoid repaying the loans," he said, adding that banks require a strong support from the judicial system to bring the willful defaulters to book.

Rahman said the central bank also instructed banks to reschedule bad loans following the rules and regulations in a bid to reduce the NPL.

The central bank asked the banks, which faced provisioning shortfall against their disbursed loans, to take up a detail plan to manage the deficit, said Rahman, also the managing director of Dhaka Bank.

The BB ordered the lenders to increase use of electronic payment channels such  as the Real-Time Gross Settlement and    the Bangladesh Electronic Fund Transfer Network, to establish a cashless society.

The ABB requested the central bank to relax the selling rate of the bills for collection—used for import payments—to cool down the foreign exchange market.