Introduction to Loan Defaulters in Bangladesh
Banks in Bangladesh have recently compiled a list of 3,483 wilful loan defaulters, who collectively owe approximately Tk 290 billion. This move is seen as a step in the right direction towards addressing the issues of loan recovery. However, it is concerning that no major business group is featured on this list. Most of the individuals on the list have defaulted on relatively small loans, with the highest amount being Tk 1.5 billion. Moreover, over a thousand people on the list have defaulted on credit card payments, ranging from Tk 10,000 to Tk 1 million.
Concerns Over Large-Scale Defaulters
Large-scale defaulters, who owe billions, remain shielded from the list despite clear evidence of wilful default. Wilful default refers to the deliberate non-repayment of loans despite having the capacity to do so. Officials suggest that many banks are hesitant to label large-scale borrowers as wilful defaulters, as they fear it may hinder their recovery efforts. Instead, banks prefer to negotiate with major clients rather than legally classifying them as wilful defaulters. In cases where recovery issues persist, the central bank has instructed other banks to pursue legal action, including lawsuits and the auction of collateral.
Leniency Towards Wilful Defaulters
The approach of banks and the central bank towards wilful defaulters has been criticized for being too lenient. This leniency is believed to have encouraged wilful defaulting. Furthermore, the Bangladesh Bank has not sent the list of wilful defaulters to other state agencies, as required by the Bank Company (Amendment) Act 2023. The law empowers the central bank to share the list with agencies such as the Bangladesh Securities and Exchange Commission and the Office of the Registrar of Joint Stock Companies. This would enable restrictions on defaulters, including limitations on overseas travel, trade licence acquisition, or business registration. The law also allows for further restrictions, such as bans on defaulters from buying property or receiving government awards.
Governance Lapses and Nexus of Banks and Borrowers
The failure to make public the list of wilful defaulters and take corresponding action reflects governance lapses and hints at a long-standing nexus between banks and politically connected borrowers. Experts argue that this inaction sends a signal that wilful defaulters can escape without facing any punitive measures. Central bank data shows that non-performing loans have surged to about Tk 6,000 billion by June from Tk 4,200 in March. The lack of meaningful government action on this issue renders the periodic publication of outstanding or non-performing loan figures meaningless.
Conclusion
The government needs to be more stringent about loan default, regardless of the amount. The current leniency towards wilful defaulters, especially large-scale ones, undermines efforts to address the issue of loan recovery. It is essential for the Bangladesh Bank to share the list of wilful defaulters with relevant state agencies and for the government to take concrete actions against defaulters. This includes imposing restrictions on their activities and ensuring that they face punitive measures for their actions. Only through such measures can the culture of wilful defaulting be effectively addressed, and the integrity of the banking system be maintained.
