Special Correspondent :
Bangladesh Bank (BB) has proposed to establish separate ‘bankruptcy courts’ in all the districts across the country to deal with the simmering banking crisis created by an alarming rise of defaulted loans.
The country’s banking sector’s regulator (BB) sent the proposal in a recent letter to the finance ministry arguing if this court can be established in each district within the ambit of Bankruptcy Act, it will help reduce the default loans significantly.
The letter also proposed to amend Bankruptcy Act, 1997 and Artha Rin Adalat Ain, 2003 for expediting recovery of defaulted loans.
“Separate bankruptcy court should be established in each and every district in order to effective enforcement of the Bankruptcy Act and fulfill its core objective,” BB spokesman Md Serajul Islam told The New Nation.
Bankruptcy itself refers to an instance in which a person or business cannot repay their debts. Once the debtor files the petition, the bankruptcy courts decide the following proceedings.
The court measures and evaluates the debtor’s situation, and then returns a process and plan for how the debtor’s assets may be used to repay a portion of outstanding debt. A bankruptcy judge should oversee the decision, and that judge is able to decide whether or not the debtor should be discharged of their debts.
“The central bank continues to put pressure on commercial banks to bring dowm their non-perfforing loans at tolarable levels. Bsides, it is also working on legal issues to facilitate recovery of banks’ bad debts and bring out the country’s banking sector from long-inherited default culture,” said Md Serajul Islam, who is also an executive director of BB.
Observers said, the Bankruptcy Act and Artha Rin Adalat Ain were enacted to facilitate fast recovery of defaulted loan and to get rid of the loan defaulter’s culture. But in reality, there is no effectiveness of first one though the second one continues to remain in force.
“It is high time to bring necessary amendments to the above laws when toxic loans choked the country’s banking sector,” former BB
Governor Dr Salehuddin Ahmed told The New Nation.
He said, bankruptcy law has remained ineffective and not enforced in Bangladesh for various reasons. Time has come to update the law to expedite debt resolution by banks saddled with thousands of crores of bad loans. The delinquent borrowers are not paying back the borrowed loan and thereby having an adverse effect on the economy.
“The government should establish necessary Bankruptcy Courts’ to expedite bankruptcy proceedings as well as to facilitate realisation of public money from unscrupulous businessmen and ‘willful’ defaulters,” he added.
Dr Salehuddin Ahmed further said that default loans at banks have gone up alarmingly expositing vulnability of the countries banking sector.
“The government should immeditely take necessary legal mesaures to rein in the growing non-performing loans. Otherwise, the sutuation will go beyong the controll leading many banks to backruptcy,” he said.
The amount of non-performing loan (NPL) stood at Tk 93,911 crore at the end of 2018, up from Tk 74,303 crore a year ago, according to BB data.
The NPLs now accounted for 10.30 percent of the banking sector;s total loans, up from 9.31 per cent in 2017.
Bangladesh Bank (BB) has proposed to establish separate ‘bankruptcy courts’ in all the districts across the country to deal with the simmering banking crisis created by an alarming rise of defaulted loans.
The country’s banking sector’s regulator (BB) sent the proposal in a recent letter to the finance ministry arguing if this court can be established in each district within the ambit of Bankruptcy Act, it will help reduce the default loans significantly.
The letter also proposed to amend Bankruptcy Act, 1997 and Artha Rin Adalat Ain, 2003 for expediting recovery of defaulted loans.
“Separate bankruptcy court should be established in each and every district in order to effective enforcement of the Bankruptcy Act and fulfill its core objective,” BB spokesman Md Serajul Islam told The New Nation.
Bankruptcy itself refers to an instance in which a person or business cannot repay their debts. Once the debtor files the petition, the bankruptcy courts decide the following proceedings.
The court measures and evaluates the debtor’s situation, and then returns a process and plan for how the debtor’s assets may be used to repay a portion of outstanding debt. A bankruptcy judge should oversee the decision, and that judge is able to decide whether or not the debtor should be discharged of their debts.
“The central bank continues to put pressure on commercial banks to bring dowm their non-perfforing loans at tolarable levels. Bsides, it is also working on legal issues to facilitate recovery of banks’ bad debts and bring out the country’s banking sector from long-inherited default culture,” said Md Serajul Islam, who is also an executive director of BB.
Observers said, the Bankruptcy Act and Artha Rin Adalat Ain were enacted to facilitate fast recovery of defaulted loan and to get rid of the loan defaulter’s culture. But in reality, there is no effectiveness of first one though the second one continues to remain in force.
“It is high time to bring necessary amendments to the above laws when toxic loans choked the country’s banking sector,” former BB
Governor Dr Salehuddin Ahmed told The New Nation.
He said, bankruptcy law has remained ineffective and not enforced in Bangladesh for various reasons. Time has come to update the law to expedite debt resolution by banks saddled with thousands of crores of bad loans. The delinquent borrowers are not paying back the borrowed loan and thereby having an adverse effect on the economy.
“The government should establish necessary Bankruptcy Courts’ to expedite bankruptcy proceedings as well as to facilitate realisation of public money from unscrupulous businessmen and ‘willful’ defaulters,” he added.
Dr Salehuddin Ahmed further said that default loans at banks have gone up alarmingly expositing vulnability of the countries banking sector.
“The government should immeditely take necessary legal mesaures to rein in the growing non-performing loans. Otherwise, the sutuation will go beyong the controll leading many banks to backruptcy,” he said.
The amount of non-performing loan (NPL) stood at Tk 93,911 crore at the end of 2018, up from Tk 74,303 crore a year ago, according to BB data.
The NPLs now accounted for 10.30 percent of the banking sector;s total loans, up from 9.31 per cent in 2017.
