Poor loan recovery from top defaulters

Four state-owned commercial banks (SCBs) achieved only 21 percent of their targeted loan recovery from the top 20 defaulters of each bank last year.
Moreover, the banks' credit disbursement was frustrating with that of Sonali Bank and Janata Bank declining by 16 percent and 13 percent in the year.
Credit disbursement of Agrani Bank increased by 12 percent and Rupali Bank's three percent only, available data shows.
Bangladesh Bank (BB) at a meeting with top brass of the four SCBs yesterday reviewed their overall performances in 2007.
BB Governor Salehuddin Ahmed expressed dissatisfaction over the poor recovery of defaulted loans.
Sources said the SCB officials tried to defend this saying that they could not recover major chunk of the loan due to filing of writ petitions with the High Court by the top defaulters.
In response, the central bank governor asked the SCBs to appoint eminent lawyers to get the writs disposed of.
Syed Abu Naser Bakhtiar, chief executive officer of the Agrani Bank, told The Daily Star, "It's a painful matter for us that big loan defaulters thwart the process of loan recovery by filing writ petitions with the High Court while small borrowers, despite being affected by floods and river erosions, are repaying loans on time."
He said the SCB officials requested the BB governor to consult the government regarding formation of a special bench of the HC for dealing only with writs concerning recovery of defaulted loans. "We will appoint renowned lawyers on contract for disposal the writs against recovery of defaulted loans."
A high official of Sonali Bank said they are not considering drastic actions against the top loan defaulters, mostly big business ventures of the country and listed on the capital market. "If we go for drastic actions, that will affect the share market," he said.
A document placed at yesterday's meeting showed that the SCBs recovered Tk 54.15 crore against the target of Tk 255 crore from the top 20 defaulters last year.
The largest SCB Sonali Bank recovered Tk 3.43 crore against a Tk 169.4 crore target, which is 2.02 percent. Agrani Bank realised Tk 3.17 crore or 16.01 percent of a target of Tk 19.8 crore, Rupali Bank recovered Tk 3.59 crore or 9.32 percent of a Tk 38.5 crore target.
Janata Bank however recovered Tk 43.96 or 159.86 percent of its target of Tk 27.5 crore.
But the SCBs performed well in recovering classified loans (other than from top 20 defaulters). The banks recovered Tk 807 crore classified loans in 2007 against a target of Tk 946 crore.
Sonali Bank realised Tk 409 crore or 93 percent against a Tk 440 crore target, Janata recovered Tk 143 crore or 87 percent against Tk 165 crore, Agrani Tk 216 crore or 78 percent against Tk 275 crore and Rupali realised Tk 39 crore or 59 percent against a target of Tk 66 crore.
The data also showed that classified loans of the banks increased by 1 to 14 percentage point last year due to poor recovery and new defaulted loans.
Classified loan of Sonali Bank rose to 35.36 percent in 2007, which was 9.77 percentage point up from that in 2006, classified loan of Janata reached 17.21 percent, 4.01 percentage point higher than that in the previous year, Agrani's classified loan rose to 28.67 percent, 0.57 percentage point up from that a year ago and Rupali's classified loan increased to 40.51 percent, which was 14.48 percentage point higher than in 2006.
The SCBs' operating costs also went up during the year though the central bank had asked them to reduce that by five percent.
Sonali Bank's operating expenses increased by 18 percent, Janata's eight percent, Agrani's five percent and Rupali's four percent in 2007 compared to those in 2006.
The SCB officials said reducing yearly operating cost is not practical at the moment because this would require the banks to go for drastic job cut.