Wednesday, 27 September, 2023

Go tough on wilful loan defaulters

In spite of a growing clamour against non-performing loan (NPLs) and relentless media coverage about the issue, the latest Bangladesh Bank data show that accumulated NPLs in the banking sector rose to a staggering Tk 1.31 trillion. Of the total bad loan, Tk 109.64 billion has been added in the first quarter of the current year, which indicates that NPLs are rising alarmingly amid laxity and lack of good governance in the banking sector.

Corruption and irregularities in the banking sector is mainly responsible for the rise in default loans. Dishonest business organisations and individuals manage to take loans with the sole intention of defaulting on the loan. Earlier it was found that a section of corrupt bankers help the wilful defaulters in getting the loans. Therefore, in order to save the banks from the growing culture of loan default, bankers should be held accountable first. It is the duty of the bankers to carry out proper scrutiny of loan applications. Besides, the role of the members of the banks’ Board of Directors is also being questioned. As appointments to the boards are made mostly on political consideration, they sometimes come in the way of maintaining rules and regulations. The central bank, therefore, should hold accountable those responsible and force necessary adjustment.

Moreover, political influence has aggravated the situation to a large extent. Banks often cannot take action against loan defaulters because of their strong political backers who foil any effort to punish the offenders. It is hoped that the authorities concerned will spare no efforts in streamlining management of the state-owned as well as private banks.  Strict enforcement of discipline in the management of banks is the need of the hour.

Besides, while dealing with bad loans, the central bank will have to determine whether a loan default was wilful or circumstantial. Exemplary punishment must be taken against wilful defaulters. Besides, in order to handle bad loan problems more efficiently, the Artha Rin Adalat Ain should be reformed. The law is riddled with loopholes and loan defaulters are making full use of it. Overall, a well-coordinated action plan should be taken and implemented in earnest to curb NPLs.