Whom to blame for the alarming rise in bad loans?

Political identity and patrons kept hidden

Shakhawat Hossain
Comparing the condition of the country’s banking sector with Jade Mur well-kown poem “The Bogus Boo, Finance Minister AHM Mustafa Kamal on Saturday disclosed in parliament a list of the country’s top 300 loan defaulters, who swallowed Tk509.42 billion worth of bank money. This figure makes up around half the total default loans of Tk 1.02 trillion with banks and non-banking institutions until 2018.
According to the Finance Minister, the number of total loan defaulters reached 170,390 in December 2018, up from more than 58,000 in September 2015. The total amount of default loans also increased by 73 per cent to Tk 1.02 trillion during the period, the finance minister told parliament. The finance minister also disclosed a list of borrowers who took out more than Tk 50 million loans from all banks.
However, the Finance Minster was clever enough to hide the political identity of the big defaulters and also carefully avoided the issue of the political favour they obtained while securing the bank loan and keep it with them over the years.
Responding to question in the parliament, Mr Kamal argued in favour of loan defaulters saying that the environment was not in favour of business people during the period when the number of loan defaulters and loan amount saw a steep rise.
Also blaming the lenders, Mr Kamal, a businessman himself said the banks failed to choose good borrowers while lending money. “A loan becomes risky when there is a deficiency in collateral, submitting the same mortgage in more than one bank and showing the artificially inflated value of their assets,” he said. “Under such circumstances, the possibility of bad loans rises.”
On the question of recapitalising some banks by the government, the minister said the government provided Tk 136.12 billion between fiscal year 2015-16 and FY 2018-19 as they were suffering from capital shortfall.
According to the minister, the top 300 defaulters owe Tk 70,571 crore with the country’s banks and financial institutions, as per the Credit Information Bureau of Bangladesh Bank. Of the amount, Tk 52,837 crore has been rated as classified.
The Minister also stated that state-owned banks waived the interest of around Tk 12.0 billion last year against more than 6,000 loans.
Actual top defaulters escape the list!
Mysteriously, however, the names of the big shots are missing from the Finance Minister’s list. It may be noted that if any company owned by a person or group is identified as a defaulter, the entire group or that person should be marked out as a defaulter in line with the criteria of Credit Information Beureau (CIB).
According to sources familiar with the issue, a sinister cabal of people in the central bank and scheduled banks is involved in the scam. These elements somehow stand by the loan defaulters. Such collusion enables the loan defaulters to find a way of staying out of the dragnet. In the opinion of experts, the list of loan defaulters has been expanding, which renders the issue extremely critical in these present times.
Compounding the problem, Mustafa Kamal did not provide any facts and figures associated with the top loan borrowers. In the considered view of economists, it is vital to expose the names and particulars of the top loan borrowers in order to measure the real magnitude of defaulted loans. Financial sources have let it be known that the top ten borrowers have siphoned off considerably higher amounts of money than the loans of the defaulters whose names have been revealed.
Former Bangladesh Bank deputy governor Khondkar Ibrahim Khaled, however, told a media outlet on Saturday that the list did not include the actual top loan defaulters. He also noted that many top defaulters successfully escaped the list obtaining stay orders from the High Court filing writ petitions against the banks’ information that they provided to the Credit Information Bureau of the Bangladesh Bank.
Defaulted loans soar to Tk220,000 crore in 20 yrs
Meanwhile, Bangladesh Bank (BB) on Monday submitted a report to the High Court stating that the amount of total defaulted bank loans is Tk 2.2 lakh crore in the last 20 years.
Of the total loan defaults, Tk110,000 crore is recoverable, Tk80,000 crore worth of loans are entangled in legal proceedings, while Tk30,000 crore has been written off, the report states. The defaulters took out these huge loan amounts from different banks using 10,476 different accounts over the last 20 years.
On Monday, Attorney General Mahbubey Alam on behalf of the central bank submitted a sealed copy of the report before the the High Court bench of Justice FRM Nazmul Ahsan and Justice KM Kamrul Kader .
The court earlier asked Bangladesh bank to submit the list of defaulters in response to a public litigation writ petition filed a human rights group, Human Rights and Peace for Bangladesh (HRPB).
While hearing of the writ petition, the High Court Division on Monday extended until August 25 the status quo on the concessions given to loan defaulters by the Bangladesh Bank. On May 16, BB issued a circular providing concessions to loan defaulters for rescheduling their bad loans making down payment of two per cent of the credit. It also allowed fresh 10-year grace period to repay the loans.
It also issued a rule asking the authorities to explain why an order should not be given to form a powerful commission to identify past irregularities and corruption in the banking sector.
IMF mission concerned over soaring NPLs in banks
The International Monetary Fund (IMF) mission has recently expressed its grave concern over the rising trend of non-performing loans (NPLs) in the banking sector. The NPLs of banks rose by a staggering Tk16,962crore in a period of three months till March this year, increasing the amount of stress loan in the banking sector to Tk1,10,873.54crore, according to the central bank data. It also wants to know about the definition of wilful loan defaulters, which will be used for identifying them legally. The visiting IMF mission’s interest was shown at a meeting held at the Bangladesh Bank (BB) headquarters in Dhaka on Wednesday with BB Banking Reforms Advisor SK Sur Chowdhury in the chair.
(Shakhawat Hossain is Dhaka-based freelance Journalist and Political Commentator)