New law coming to rein in wilful defaulters

The draft of Bank Company (amendment) Act 2021, approved by the Cabinet Division on Monday, defines wilful defaulters for the first time and provides for stringent actions against them.

An individual or institution will be deemed a wilful defaulter if they do not pay back the lender despite having the capacity.

Another definition says if a borrower transfers ownership of mortgaged property without taking prior approval from the lender and does not pay back the loans following the Bangladesh Bank's guidelines, they will be called a wilful defaulter.

At present, the Bangladesh Bank brands a borrower as a wilful defaulter when the borrower fails to repay a loan after it has been rescheduled for a third time. A wilful defaulter will not be able to get more loans or rescheduling opportunities. The definition was enforced through a circular.

Now, wilful defaulters will face severe actions if the amendment draft is made into a law.

The draft Bank Company Act approved by the cabinet includes a new provision that wilful defaulters cannot be directors of any bank or non-bank financial institution for as long as five years after they have been cleared of loan delinquency.

Wilful defaulters will not be allowed to travel abroad at all. Also, the ban on registering their homes, cars, and companies in their names remains in force. They will not be invited to social and state programmes and will not be allowed to hold positions in any organisation.

According to the draft, there will be two committees to decide wilful defaulters – one is named identification committee and the other is confirmation committee.

After the final decision by the confirmation committee, wilful defaulters will get 30 days' time to appeal to the Bangladesh Bank.

The central bank will finally make the judgment.

Chairman of Brac Bank Dr Ahsan H Mansur said, "The Bangladesh Bank must be free from political influence in identifying wilful defaulters because such defaulters will try to stay out of the list by exerting political influence."

The amendment should make sure defaulters and wilful defaulters cannot go on with their usual lives.

"The process of recovering loans from them has to be made easier," said Ahsan Mansur, also a member of the executive committee of the private bank owners' association, Bangladesh Association of Banks.

The amendment is aimed at bringing an end to default culture and to bring discipline in the financial sector, said the proposed act.

Default loans in the banking sector amounted to Tk88,734 crore at the end of December last year, which was 7.66% of total loans, according to Bangladesh Bank data.