HC orders BB to probe loan sanctions, recovery

Staff Correspondent

4 November, 2019 12:00 AM printer

It asks to follow 2012 master rule for issuing fresh loan to defaulters

The High Court on Sunday directed the central Bangladesh Bank (BB) to form a nine-member expert committee to detect loopholes and irregularities in loan sanctioning and recovery.

It directed the central bank to follow the 2012 master rule in distributing loans to defaulters, requiring defaulters to deposit 15 per cent of their dues and interests in order to get a fresh loan.

The apex court also directed the authorities concerned to obtain opinion of the BB in recruiting top five officials to any bank.

A division bench comprising Justice JBM Hassan and Justice Md Khairul Alam passed the order disposing of a writ petition filed by Human Rights and Peace for Bangladesh (HRPB).  

The court also asked for a report on the total money laundered to different countries and what steps were taken to bring them back.

The BB officials will face legal action if they do not comply with the order, the HC cautioned.

Earlier, on July 8, the Supreme Court cleared the way for loan defaulters to reschedule their credits by 2 percent down payment and 9 percent interest over 10 years.

It gave legality to a BB circular facilitating the loan defaulters to reschedule their credits by staying a High Court order that earlier halted the circular.

However, the SC said anyone opting for the opportunity will not be allowed to borrow fund from another bank in two months.

The SC also directed the High Court to dispose off a writ petition challenging the Bangladesh Bank circular pending with it.

The High Court earlier stayed the BB circular following a petition filed by HRPB which challenged  legality of the central bank’s decision.

Talking to daily sun, advocate Manzill Murshid, counsel and president of HRPB, said “The central bank’s new policy would encourage the bank defaulters, putting commercial banks in more trouble.”

 The High Court, on May 21, stayed the Bangladesh Bank’s circular that allowed the loan defaulters to get their credit rescheduled and take new loan at 2 percent interest rate and pay it in 10-year-long installments.

The HC observed that giving such privilege to loan defaulters is tantamount to feeding snakes with milk and banana. The HC issued a status-quo on the Bangladesh Bank notice that allowed defaulters to reschedule their bank loans and get further loan.

The central bank gave an opportunity to big loan defaulters through the notice, which creates scope of Tk 1 lakh crore laundering, the court observed.

The HC said, “The central bank is making the genuine businessmen pay 14 to 15 percent interest which is discriminatory.”

It observed that the central bank is yet to execute the prime minister’s instruction to lower the interest rate to a single digit for bank loans.

Bangladesh Bank issued loan rescheduling policy in 2015, regularising Tk150 billion in credit taken by 11 industrial groups, but only two of these groups have been repaying.

According to the latest data, the total default loans in the banks in Bangladesh rose from about Tk225 billion in the beginning of 2009 to over Tk1.3 trillion by the end of 2018, which is more than a third of the national budget for 2018-19 fiscal year.

On May 15 this year, the central bank issued a directive, saying a maximum 9 percent interest will be charged on the rescheduled loans and the tenure for the repayment is 10 years with a grace period of one year.

Under the existing policy, the defaulters can reschedule their classified loans by making a down payment of 10 to 50 percent.

Earlier on May 16, the High Court directed the Bangladesh Bank authorities to submit a list of loan defaulters exceeding the debt of Tk1 crore by June 24.

Quoting Article 46 of the Bangladesh Bank Order 1972, the central bank’s counsel Barrister M Moniruzzaman told the court that there is a legal restriction on the part of the bank to disclose the names of the defaulters.

Manzill Murshid argued that the central bank is trying to use Article 46 as a shield to protect the loan defaulters.

As per the Article 102 of the Constitution, any individual or organization is bound to comply with the order passed by the High Court, he added.

The HC cautioned the Bangladesh Bank authorities that they will face action if they do not submit a list of the loan defaulters within the stipulated time.

Later, central bank submitted a report saying the country’s total defaulted loans in the last 20 years is Tk 2.2 lakh crore.

Of the total loans, Tk 1.1 lakh crore is realisable, Tk 80,000 crore requires court orders to be realised for pending cases, and Tk 30,000 crore cannot be realized.

The money was taken by loan defaulters from different banks in the last 20 years using 10,476 different accounts.