Beyond the 100 top loan defaulters’ list

Dhaka,  Wed,  23 August 2017
Published : 16 Jul 2017, 20:25:51
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Beyond the 100 top loan defaulters’ list

It is possible that some top errant borrowers have made use of the opportunities, specially designed for them lately, and successfully got their names struck off the list of defaulters, at least temporarily, writes Shamsul Huq Zahid
Finance Minister AMA Muhith placed a list of 100 top bank loan defaulters in the just-concluded budget session of national parliament on July 09.

Since the list did not include a few names of some habitual and errant borrowers, a section of people suspected that the list was a 'filtered one'. Though there should be no reason to doubt the authenticity of the list that must have come from the central bank to the Ministry of Finance, going by the past experience one cannot, however, be fully certain about a 'perfect' list.  

It is possible that some top errant borrowers have made use of the opportunities, specially designed for them lately, and successfully got their names struck off the list of defaulters, at least temporarily.

Bangladesh's banking history has in its store many incidents where a number of genuine plunders of depositors' money had gone untouched. They could manage it primarily because of their political connections. There are many past and very recent stories of virtual loot of banks' resources by so-called clients enjoying backing from powerful political quarters. 

Such plundering was largely possible because of the induction of people having affiliation with ruling party on the boards of public banks and create opportunities for 'own men' to open banks, in some cases. 

Everybody, these days, cites loan scams involving the Sonali Bank and the BASIC Bank and refers to how politically influential people managed to be on the boards of these banks and helped plunder a substantial volume of money. Most of these people have remained untouched until now despite repeated promises made by the finance minister to take action against them. The political link of these people is so strong that even investigating agencies, including the anti-graft body, have shied away from taking appropriate actions. 

The Asia/Pacific Group on Money Laundering (APG) in a Mutual Evaluation Report recently also pointed to the governance failings and appointment of politically linked people to the board of public sector banks. It said these factors have been contributing to the rise in the size of default loans in the banking sector, frequent scams and poor recovery of stolen money. 

The government now appears to be a little bit cautious about appointing its 'own men' on the public sector banks' boards. But enough damage has already been caused to the banking sector by a host of wrong decisions. 

The size of the default loan as of April last, according to information furnished by Mr. Muhith in parliament, was Tk 1113 billion. In percentage term, the amount would be little over 10 per cent of the total outstanding loans in the banking sector.  By any standard the share is sizeable and there are ample reasons for the policymakers to be worried about it.

But if viewed in terms of total amount, it is really a staggering amount. However, not all the defaulted loans can be erased from the banks' balance-sheets, for a part would be recovered. Many borrowers who have defaulted on repayments on genuine grounds would ultimately come out clean. The problem, in fact, lies with the wilful defaulters. 

The latter group of defaulters usually target the public sector banks where monitoring is rather lax than that of their private counterparts. The unscrupulous section of borrowers tends to use their political links to siphon off funds from the public sector banks. 

It is hard to say that the private sector banks are totally immune to the problem of default loans. They too are vulnerable, but not to the extent their public counterparts are. There are, however, instances where sponsors of banks did influence loan sanctioning process and disbursement. 

However, in most causes of deliberate loan default does take place mainly because of the failure of the field level officers to thoroughly examine the authenticity of documents of collaterals offered by borrowers. Banks do often face troubles while trying to dispose of land-related collaterals, in the event of loans becoming bad, as the documents in many cases found to be forged ones. 

The bank branches do have also difficulties. The branches are required to hit certain profit targets and to achieve the same they need to lend money. In their lending bid, they are exposed to tough competition with so many rivals in the market. If they try to be rigid in the matters of collaterals, many clients would not be interested to borrow from them. Moreover, the verification of authenticity of fixed assets does always take time.  Clients are always in a hurry to secure loans. 

However, examples are many where officials responsible for verifying the authenticity of documents and physical existence of fixed assets such as land and buildings have submitted false reports in exchange for bribe money from the borrowers concerned. When such loans turn sour, the top level branch officials become victims of legal action by the banks concerned or the anti-graft body. It is alleged that many such officials are lately facing graft charges and now behind the bar. The head offices that are the ultimate authority of sanctioning loans do not take any responsibility and tend to pass on all responsibility to the branch officials. 

zahidmar10@gmail.com
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