Many wilful defaulters exploit legal loopholes: BAB chairman
We have defaulted loans of around Tk3 lakh crore, which are difficult to recover due to weaknesses in the law, he says
Many borrowers are not repaying their bank loans and have thus become wilful defaulters, despite having operational businesses, said Abdul Hai Sarkar, chairman of the Bangladesh Association of Banks (BAB).
"We cannot retrieve defaulted loans from many borrowers due to weaknesses in the laws," he said, noting that a BAB delegation raised this issue during a meeting with Bangladesh Bank Governor Ashan H Mansur on Wednesday (18 September).
"We have defaulted loans of around Tk3 lakh crore, which are difficult to recover due to weaknesses in the law. If the laws were strengthened, we could easily recover 60% of these defaulted loans," Sarker, who headed the delegation, told reporters after the meeting.
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Sarkar, also chairman of Dhaka Bank, said there has been significant improvement in the banking sector since the new governor assumed office.
"We will address the current problems together, and based on the current situation in the banking sector, we are on the right track," he said.
He noted that only six to seven banks are currently facing liquidity issues to some extent and expressed confidence that these problems will be resolved within six months, given the governor's awareness and attention to the matter.
Bangladesh Bank spokesperson Husne Ara Shikha said the BAB made several demands during their meeting with the governor on Wednesday.
In an audio message sent to journalists, she also said the BAB leaders, along with the Association of Bankers Bangladesh (ABB), requested participation in the central bank's policy-making process.
The governor responded that stakeholder consultations could be incorporated into policy development, and that policies would be formulated with stakeholder input in mind.
The spokesperson also mentioned that many defaulted borrowers have been granted relief through court stay orders, highlighting a legal weakness that needs to be addressed. In response to these demands, the governor has agreed to implement regulatory changes concerning defaulted loans.
"BAB leaders highlighted various obstacles to the governor regarding the sale of defaulting borrowers' properties in the money loan court. The governor responded that the financial loan system needs to be made more effective and that necessary measures will be taken by Bangladesh Bank in collaboration with the Attorney General's office."
The leaders also requested that policies related to banks be tailored to the culture of Bangladesh. The governor noted that banks must interact with international banks, and therefore, policies should align with international standards. Efforts will be made to reach that alignment.
The BAB leaders also demanded separate guidelines and departments for Sharia-based banks. The governor did not comment on this request.
Additionally, they requested that the central bank refrain from interfering with the salaries of bank managing directors and employees, suggesting that it should be left to the banks themselves. The governor agreed that this would be phased out gradually.
First Security Islami Bank Chairman Mohammad Abdul Mannan said, "We are in discussions with various forums to ensure that banks can access liquidity facilities within the guidelines of the Bangladesh Bank, allowing them to borrow from other banks in accordance with Sharia guidelines."
He noted that while Islami Bank was once the leader among private banks, it is currently facing some temporary challenges. However, some banks have been provided with stronger boards.
"We are hopeful that we will resolve our issues in the shortest possible time. In the future, we aim to provide liquidity support to other banks," he added.
