Loan default issue

It is, however, observed that the private defaulters are currently showing some interest in loan repayment rescheduling considering their possible candidacy in the forthcoming election. We suggested in an earlier comment that their first installment of repayment should be kept high so that they do not get away by paying a nominal amount to start with.

The Bangladesh Bank governor in a get-tough signal to the bank managements exhorted upon them to take action against one top loan defaulter in their banks so that the message can get through to the others to repay or face punitive action. The question is there is a dichotomy between the government asking the private sector to repay loans while the state sector itself is the biggest borrower of bank money and it is also defaulting badly. It's therefore imperative that the public sector corporations become managerially so efficient that they don't have to borrow money from the banks.

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But what are we going to do with the classified loans of the public sector entities in the first place? Getting the government sector defaulters to repay their loans is becoming increasingly problematic as the following two instances illustrate. Bangladesh Agricultural Development Corporation's total defaulted loan stands at Tk 75crore. While a court has asked the bank concerned to realise the money through auction against BADC, practically, it remains a difficult proposition, because the BADC is a government entity. Another example is afforded by Bangladesh Autorickshaw Chalak Samity, a top defaulter with government guarantee for its loan worth Tk 77crore. The committee that took the loan from three banks on behalf of the samity no longer exists. The new committee that has been formed has asked for a fresh loan!

Given the sordid experience with bank loan default problems, it is imperative that there is a rethink on the whole gamut of lending policies so that these are reformed and recast with the best interest of the national economy in mind.