Banks, NBFIs intensify legal efforts to recover defaulted loans

The number of cases filed in the country's money loan courts by banks and non-bank financial institutions (NBFIs) has surged since the fall of the Awami League government, with 4,823 cases involving around Tk30,000 crore filed from August to 20 October to recover default loans, according to court sources.

Court officials say the large number of cases filed within such a short period is a record. In the first seven months of this year, from January to July, 4,600 cases were filed. In 2003, the number was 9,845.

Officials at banks and NBFIs say many large-scale loan defaulters over the past 15 years had ties to the Awami League, which was in power during that period, deterring lenders from taking legal action.

Following the fall of the Awami League government on 5 August in the face of a student-led mass uprising, banks and NBFIs are now filing more cases to recover default loans, taking advantage of the country's changed political power structure, they say.

However, the officials say slow court procedures, caused by the limited number of courts and insufficient manpower, significantly delay the settlement of cases and the recovery of defaulted loans.

Sources report that from January to June this year, 1,144 cases were settled in the money loan courts, compared to 3,367 cases settled throughout 2023.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, told TBS that as the number of cases filed has increased, they also need to be settled quickly.

Law adviser Asif Nazrul told TBS that the interim government has already instructed the courts to expedite the settlement of money loan cases. "The government plans to increase the number of money loan courts, as well as the number of skilled judges and support staff," he said.

He added, "During the rule of the Awami League, many people looted money from the banking sector. Legal action is now being taken against these perpetrators, and banks are also pursuing strong legal measures."

Political power dynamics

On 3 September, the state-owned Janata Bank filed a case in Money Loan Court-3 of Dhaka to recover a defaulted loan of Tk811 crore from a company named Ajantabd Limited.

Tabarul Haque, the bank's lawyer, told TBS that the company's chairman and managing director, Rais Uddin Khan, was known to bank officials as the brother-in-law of a secretary-level official in the Ministry of Home Affairs.

"He (Rais Uddin) rescheduled the loan multiple times, with phone calls from influential government figures pressuring bank officials or the bank's board of directors," he said.

The lawyer added, "The bank could not take legal action against him due to his political influence."

However, with the change in the political landscape, the bank has now initiated legal proceedings, he said.

The lawyer stated that the next hearing for the case is scheduled for 16 November.

When TBS tried to contact Rais Uddin, his phone number was found switched off. A message was sent via WhatsApp, but there was no response.

However, an official at Ajanta Machinery informed TBS that Rais Uddin has been living abroad since last July.

On 29 August, the head office of Agrani Bank filed a case in Money Loan Court-1 of Dhaka against Tanaka Group's Marhaba Synthetic Mills Limited to recover defaulted loans totaling around Tk405 crore.

The court issued a notice summoning the defendants and ordered them to appear before the court on 10 November.

Tanaka Group's Managing Director, Mohiuddin (Mahin), told TBS, "A case has been filed in the court, and we are taking legal action against it. It will be handled legally."

He said, "Despite taking out a loan to establish the factory, we have not been able to start production in the last 14 years. After the loan was taken, the Bangladesh Bank visited the factory and shut it down, claiming that the company was owned by BNP Acting Chairman Tarique Rahman."

"As a result, since it was not possible to invest the bank's money and begin production, the loan has become defaulted," he added.

Courts overwhelmed by rising cases

The country currently has 67 money loan courts, with one in each district and four in the capital, Dhaka.

According to court sources, from August to 20 October, 2,353 cases were filed in the four money loan courts of Dhaka, involving around Tk10,000 crore.

Currently, there are a total of around 34,000 cases in these courts, involving about Tk1.5 lakh crore.

Nurul Huda, sheristadar of Money Loan Court-4 in Dhaka, said generally an average of 70-80 new cases were filed every month. But from August to 20 October, there were 776 cases.

According to Supreme Court sources, about 76,000 cases are pending across all money loan courts in the country.

By June 2024, the number of cases in the country's money loan courts reached around 72,000, involving defaulted loans totaling around Tk2.5 lakh crore. Of these cases, about 14,000 have been pending for more than five years, and around 5,500 cases have been suspended by order of the High Court.

A deputy managing director of a state-owned bank told TBS that filing a case in a money loan court is the last legal recourse to recover defaulted loans. When a case is filed, the defendant's name is added to the Credit Information Bureau (CIB) database.

Muhammad A (Rumee) Ali, former chairman of AB Bank, told TBS that a paucity of judges and manpower in money loan courts has caused a backlog of cases and delays in proceedings.

He emphasised that to recover bank funds swiftly through lawsuits, the presence of judges and other personnel in the courts must be regularised, and a deadline should be set for completing the trials of these cases.

He further suggested that for those who go to the High Court and file a writ against a money loan court's order, there should be a provision requiring them to deposit a portion of the total loan amount before filing the writ.

Law adviser Asif Nazrul said there is a tendency to suspend the proceedings of these cases by filing writs in the High Court. He added that a logical solution will be reached through discussions with the Chief Justice.