Special concessions for habitual defaulters

Sonali Bank, which is struggling to reduce nearly 30 percent of its bad loans, has made the strange decision to waive interest of Tk 129 crore of Alltex Group, owned by a former lawmaker and Awami League leader, who reportedly happens to be one of its top five defaulters. The decision was made on "special consideration" according to bank officials, which makes one wonder whether banks nowadays have a "special" way of conducting business with "special people".

That such concession is being made for a regular defaulter begs the question as to what sort of an example the bank is setting. And what the problem is in trying to recover the loan now, given that the bank had no qualms in giving such huge loans in the first place—which must mean that the bank had reasons to believe that it would be repaid at the time of issuance or, that it had given the loans without necessary appraisals.

What is guaranteed, however, is that the most likely outcome of this would be to encourage more defaults in the banking sector, which is already tottering from being hit by one financial scandal after another. All of which, it is important to mention, had happened right under the nose of the Bangladesh Bank, whose performance as regulator has been less than stellar to say the least, as evident from the current disastrous condition of public banks.

Therefore, what is needed now is better regulation and the urgent recovery of loans, rather than greater concessions for habitual defaulters. And the sooner the regulators realise that, the better.