Editorial
Recovery of bad loans
Bangladesh banks oversee process
The rate of bad loan recovery from the top five banks, namely, Sonali, Janata, BASIC, Agrani and Rupali has proved unsatisfactory from the central bank's perspective. Over the period July – September, 2017, non-performing loans stood at Tk 80,307 crore, which is 29 percent higher than the amount in December, 2016! We know that these banks managed to recover only Tk 10,340 crore during this period, and this rate of recovery, despite prodding from Bangladesh Bank (BB) has been dismally poor.
It is interesting to note here that BB has asked commercial banks to set targets of loan recovery from the Top-20 defaulters for 2018 once their respective boards have been constituted. Each bank has been asked by BB to submit its loan recovery plans, and are to submit quarterly progress reports on amounts of recovered loan on a quarterly basis. This is all very good news of course, but our question is precisely what steps the respective banks (with highest NPLs) have taken to strengthen the mechanisms involved for loan recovery. Because as we understand it, the recovery rate of state-owned BASIC bank stands at 0.37 percent and the highest stands at 2.79 percent for Sonali Bank The current state of loan recovery mechanism should be gone into and new mechanisms may be thought of in this regard. Rescheduling loans should not be the norm.
We would also like to see BB taking a closer look into precisely what banks with highest NPLs are doing with their litigation teams to increase loan recovery rate. While BB has instructed these banks to take steps to contest writ petitions by defaulters at the High Court level, it would appear that the banks' legal teams are flagging behind in this area. So, while the central bank may issue good directives to the banking sector, it will need to be backed up at policy level to ensure that its directives are followed by respective banks. These banks need to come up with new, workable loan recovery mechanisms and strengthen the legal team otherwise bad loans will continue to balloon.