Name and shame loan defaulters

The finance ministry has recommended that state-run banks publish the details of large loan defaulters on their websites at regular intervals in order to make the defaulters feel embarrassed.

The regular publication of such details would help recover loans that have remained unpaid for years as the defaulters are usually socially and politically influential and would want to avoid the embarrassment.

This is one of 27 recommendations -- short, medium and long term -- that the banking division of the finance ministry sent to state-run banks and the central bank last month for implementation.

The ministry said the major loan defaulters represented an influential quarter of the society and many think that publicising their names and addresses would lead them to come forward to repay their loans and avoid public embarrassment.

"Most borrowers who have defaulted for long periods are established in society; they are financially and politically influential," the ministry said in its observation.

It said an up-to-date list of major loan defaulters would have to be automatically published in the websites of the banks, notice boards and other visible locations.

A top official of the banking division said they would begin monitoring the implementation status of the recommendations at the beginning of next year.

Economists and policymakers welcomed the move saying that the defaulters should be shamed if that contributed to recovery of the loans.

The Anti-Corruption Commission (ACC) Chairman Iqbal Mahmood said if the government has taken the step, then it will have a positive impact on realising public money.

Agrani Bank Chairman Zaid Bakht said if such a directive was given, they would definitely comply with it by publishing the list of the defaulters.

He said the issue of publication of such a list had been discussed at various platforms on different occasions, but it was not implemented as the loan defaulters were socially influential.

"The default culture has become like a cancer in the economy," said Zaid, also a renowned economist.

"To come out of the vicious cycle [of loan defaults], social pressure has to be created on them. And it is not possible without collective efforts," he said.

Zahid Hussain, lead economist at the World Bank's Dhaka office, said automatic publication of the identity of loan defaulters, big ones in particular, at regular intervals on the websites of respective banks would at least help name and shame the defaulters.

Hussain said this in turn would enable the print and electronic media to bring their identities to broader public attention.

He added that banks failing to do so should be refused any kind of recapitalisation assistance and those complying should be shielded from any kind of external pressure.

“Whether or not naming and shaming will help change the default culture will of course depend on the extent of follow-up actions to penalise wilful defaults. Naming and shaming will certainly be a step in the right direction.”

After years of default loans, various scams and deterioration of the financial status of state banks, the finance ministry organised a workshop titled “Review of the condition of the state owned banks: Ways to face the challenge” in August last year.

Finance Minister AMA Muhith, State Minister for finance MA Mannan, Bangladesh Bank Governor Fazle Kabir, Chairman of the Parliamentary Standing Committee on Finance Ministry Abdur Razzaque and various economists participated in the workshop.

Besides, high officials of the central bank and various state owned banks also identified the problems and made recommendations.

A banking division official said the recommendations had been discussed by the officials at inter-ministerial meetings for the last one year.

They identified the implementable recommendations, after taking the approval of the finance minister, and sent those to the central bank and state banks last month.