Rejaul Karim Byron

The default loans recovery remains poor, despite drives from the central bank and state-owned banks.

Bangladesh Bank data shows only 12 percent achievement of the Tk 388 crore bad debt recovery target from top 20 defaulters in 2010. During January-September, state-commercial banks could recover Tk 47crore.

The target was to recover Tk 1,352 crore from other default borrowers, but Tk 597 crore or 44 percent was recovered in the first nine months of the current calendar year.

Till September 2010, such bad loans stood at around Tk 12,080 crore.

Among the state banks, Sonali Bank could retrieve 1.14 percent, Janata 19.79 percent, Agrani 26.35 percent and Rupali 3.19 percent from the top 20 defaulters.

Realising the bad loans is among the specific targets Bangladesh Bank has set for the state banks.

The central bank has been putting pressure for years on these banks to recover fast the bad loans.

“There is no significant improvement yet in bad loan recovery, especially from the top defaulters,” said a central bank high official.

State bank officials attribute such slow recovery to a sloth in the disposal of cases filed against the defaulters. Big defaulters' writ petitions lying with higher court have also stuck up the whole process of realisation of the classified loans, they pointed out.

“The influential borrowers file writ petitions with the High Court and get the loan recovery process stalled,” Sonali's Chairman Qazi Baharul Islam told The Daily Star.

When the bank goes for acquiring a property mortgaged against the loans, the initiative turns futile just because of legal barriers, Islam said.

The biggest state bank chief also pointed to policy flaws. The relaxation in loan repayment the government allows for the sick industrial units in the apparel and jute sectors is also a hindrance to the bad loans recovery, he said.

The defaulters often apply for loan rescheduling without making any downpayment, he said.

Islam also pointed out that banks were helped in re-capitalisation to face global recession fallout, but the government had not extended to the banks any concessions with regard to loan recovery or its sanction.

According to Bangladesh Bank statistics, till September 30, a total of 21,029 cases relating to recovery of loans remained pending with the courts. Borrowers owe Tk 11,810 crore to the state banks.

Meanwhile, an IMF mission that visited Bangladesh recently has urged the government to initiate a second time reform programme to improve the state banks' overall performances. Recovering bad loans and meeting the banks' capital deficit are under the purview of such a reform scheme.

However, the government has formed a bank reform commission headed by the Sonali Bank chairman.

A finance ministry official said following the commission's recommendations they will start the reform programme.

Source:The Daily Star