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Bad loans pile up

Legal complications, political influence frustrate govt, central bank's recovery move

Rejaul Karim Byron
The volume of bad loans at banks has increased despite recovery measures by governments and the central bank over the last two decades.
Bank officials say the efforts to recover debts do not succeed for legal complications and political clout of the borrowers.
The banks have filed cases against those liable for around 55 percent of the loans in default, but could not recover much due to legal foot-dragging.
The lenders appear helpless when it comes to recovering defaulted loans from politically influential quarters.
Borrowers involved with the ruling alliance or party can reschedule their repayment plans at will and get off the defaulters' list. They however get listed as defaulters when their party is in opposition.
As of March, loans in default added up toTk 38,774 crore. Of the amount, Tk 23,586 crore were classified and Tk 15.188 crore written-off loans.
The central bank adopted the policy of writing off loans in 2003. said bank sources.
Here, the sources added, write-off does not mean exempting the borrower from paying back the debt; rather it means removing from a bank's balance sheet a loan deemed incollectible.
Since introduction of the policy, defaults on loans decreased only in the first year.
In December 2003, default loans amounted to Tk 16,000 crore. After a year, they came down to Tk 14,200 crore.
They however kept growing again in the years afterwards.
In March, bad debts excluding those written offtotalledTk 23,586 crore.
The banks have filed 37,481 cases against those in default on Tk 21,007 crore loans till December31.2008, BB statistics show.
The four state-owned banks have filed 22,612 cases for recoveringTk 11,558 crore bad loans, the specialised banks 6,626 cases for Tk 2,021 crore and the private commercial banks 8,161 casesforTk7,313crore.
Some of the cases have been waiting for disposal for around three decades. In many cases, the banks get verdict in their favour only to be stayed by the higher court.
A Sonali Bank official said the SOBs' inability to hire competent lawyers is a major reason why they have a higher number of cases to be disposed of.
A central bank official said though laws have been amended to help banks recover loans, the success rate is not satisfactory yet.
Often banks get decrees from the Artha Rin Adalat (loan tribunal) for recovering the loans. But borrowers file writ petitions with the higher court, causing the cases to drag on for years.
SM Aminur Rahman, managing director of Janata Bank Ltd. told The Daily Star that assigning more High Court benches to resolve writs would make things much easier for the banks.
* Since independence, the banks had around 67,336 cases settled, but they got back only Tk 4,200 crore against Tk 9,000 crore they had claimed.
They could not realise a substantial amount because of out-of-court settlements.
On July 5, Finance Minister AMA Muhith placed in parliament a list of 2,196 people defaulting on loans to the tune ofTk!5,451 crore.
Many of the borrowers have been defaulters for up to three decades.
Bank sources said powerful thei'f'l«ShV rescheduled taking advantage of the legal loopholes and favourable political climate.
Dandy Dyeing, owned by former prime minister Khaleda Zia’s brother Sayeed Eskander and her son Tarique Rahman, came 54th on the July 5 list with loans of Tk 41 crore.
It had its loans regularised immediately after the four-party alliance came to power in 2001.
With the BNP-led alliance ) in opposition, Dandy Dyeing is now listed as a defaulter.
Likewise, several firms owned by Tarique Rahman's friend Giasuddin Al Mamun are also on the defaulters' list.
According to Muhith's list, eight companies of Beximco Group are defaulting on loans oflk 1.000 crore. Of them, four are among the top 10 defaulters.
Beximco, whose Vice-chairman Salman F Rahman is private sector development adviser to Awami League President Sheikh Hasina, however claims they have regularised all their default loans.
Beximco had its debt payments rescheduled as soon as the AL-led grand alliance came to power.
Moreover, the finance minister has lately announced that the government would soon publish a fresh list that may not have Beximco firms.
The first list of defaulters was published at the beginning of the 90s by the then government's finance minis-* ter MSaifur Rahman.
Muhith's was the second of its kind.
As his list is based on the information updated till March, many of the defaulters got their loans rescheduled by the time it came out.
Against this backdrop, bankers wonder whether the finance minister should publish a list every three months.
Bangladesh Bank once undertook a Large Loan Restructuring Scheme (LLRS) to reduce the volume of default loans.
Under the LLRS, loans amounting to Tk 50 crore and above was supposed to be
The central bank issued a circular in this regard in 2003, but all these efforts came a cropper.