Time to tackle habitual defaulters
A distinction must be made between habitual defaulters and general defaulters—the latter group may default on loans due to systemic problems or circumstances beyond their control. But the former are people who have made it a habit of not meeting their obligations to the bank.
The relentless bleeding of the banking sector by habitual defaulters is contributing to the rise in nonperforming loans. This culture of siphoning off bank money in the name of taking loans has adversely affected the health of 14 private and six state-owned banks. Indeed, this paper carried a news report on March 7 highlighting the problem where widespread loan fraudulence and the influence of a sponsor director have turned a highly profitable bank into a "sick" one and its rating has fallen from Category A to Z (a category reserved for "sick" companies).
The experience of repeated scams in the banking sector over the last so many years has shown us that banks' legal wings have been unable to bring to book defaulting parties and the proceedings over siphoned off funds have gotten bogged down in legal battles that continue year after year. Given that a defaulter faces, at best, six months' imprisonment under the Money Loan Court Act 2003, it is time to think about special tribunals that will deal with the willful defaulters.
Banking experts have repeatedly raised the alarm that unless steps are taken to give the central bank full autonomy to supervise both private and state-owned banks, the situation will only get worse. It is also necessary to review the existing laws because the punishment is sorely inadequate when we take into account that nonperforming loans reached Tk 93,911 crore in 2018, which represents an increase of about 26 percent from the previous year. The economy simply cannot sustain this phenomenal rise in NPLs and it is time to take exemplary action.
Comments