Non-Performing Loans on the Rise
The volume of non-performing loans in Bangladesh has increased significantly, reaching a record high of Tk 4,200 billion in the January-March quarter. This alarming figure accounts for 24.13 percent of the total outstanding loans, making it the highest in South Asia. The surge in non-performing loans is a cause for concern, and it is essential to address the issue to prevent further damage to the economy.
Wilful Defaulters
Banks have identified over 1,500 wilful defaulters, who are borrowers with the financial ability to repay loans but deliberately choose not to do so. Despite this, the Bangladesh Bank appears indecisive about taking action against these defaulters. The central bank’s inaction has allowed wilful defaulters to operate without facing consequences, perpetuating a culture of secrecy and protection.
The Role of the Central Bank
The Bangladesh Bank has the authority to send the names of wilful defaulters to relevant public agencies for further action, such as imposing restrictions on overseas travel, trade license acquisition, or business registration. However, the central bank has not made any decision on sending the list, despite having the power to do so under the Bank Company Act (Amendment) 2023. The law also provides for the imposition of further restrictions on defaulters, including restrictions on buying cars, land, or houses, or receiving government recognition or awards.
Lack of Action
The central bank issued a circular in 2014, stating that it would share the list of wilful defaulters with public agencies, but it has failed to act on its commitment. A central bank executive director says that it is the responsibility of the banks to identify wilful defaulters and act on the lists, following due process, before filing criminal cases against them. However, this approach may not be effective in holding all wilful defaulters accountable.
Government Intervention
The government has taken steps to restructure the boards of 14 banks, which is a commendable move towards restoring democratic governance in the banking sector. However, removing corrupt or politically connected directors is only the first step. The central bank should take a more proactive approach to holding all wilful defaulters accountable, rather than just targeting bank owners.
Conclusion
The surge in non-performing loans in Bangladesh is a pressing issue that requires immediate attention. The central bank’s inaction on wilful defaulters has perpetuated a culture of secrecy and protection, allowing them to operate without consequences. It is essential for the central bank to take a more proactive approach to holding all wilful defaulters accountable, including sending the list of defaulters to public agencies and imposing restrictions on them. Only then can the economy begin to recover from the damage caused by non-performing loans.
