Editorial
Loan default needs tough handling
Finance minister signals it, results awaited
HOW defiant the bank loan default culture remains is depicted by the data that Finance Minister AMA Muhith presented before the parliament early this week. A glance at the list of defaulters together with the amounts they defaulted on, up until March 2009 reveals an edifying picture.
The hard truth is that the names of top defaulters appear year after year, indicating two things. First, they are apt to habitually keep from repaying loans and are, therefore, willful defaulters; and secondly, they have managed to remain out of reach of any loan recovery operation by the sheer use of their clout.
And just how far-reaching their influence can get is illustrated by the fact that despite their track-record of non-payment, they keep getting fresh loans, can contract loans without deposit, get waiver on interest, aside from being able to reschedule loans on easy terms.
The finance minister after having announced the list has emphatically said that there would be no leniency howsoever mighty a loan defaulter might be. Actually, what the government needs to display at the highest level is an assertive political will to recover big loans from habitual defaulters who thrived on a culture of non-compliance.
Another marked feature of the loan dodging phenomenon relates to the preponderance of default in the state sector itself. Amusingly, this is leading the way negatively rather than positively which should have been the case! With the guarantees the government provides to different public sector enterprises, the latter have been receiving loans from banks year after year -- running into crores of taka in accumulated loans. They neither feel any qualm to repay, thinking that they have a right to the money being in the same fraternity, nor do they have any ability to pay up being perennially losing concerns. The government should set example for the private sector in the settlement of dues to be on the right moral ground to be demanding compliance from the latter. The rules that apply in the private sector should be equally enforced in the public sector, if not more forcefully.
Finally, systemic instruments that are available must be pressed into service. First, steps need to be taken to expedite adjudication of default cases in courts including Artha Rin Adalats through a capacity building. Secondly, through direct and indirect supervision, bank management should be geared towards more efficient loan disbursement operation and recovery drive including in the first place adoption of an in-house culture that resists managed loans. It appears to us that a special taskforce at the Bangladesh Bank has helped the AL government in recovering loans worth Tk 591crore. Such a trend needs to be built upon.
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