A NATIONAL daily reported that the government is likely to allow state-owned banks to use the services of private agencies to track loan defaulters in a bid to improve poor recovery of bad loans. The move initiated by the Bank and Financial Institution Division of Ministry of Finance has come at a time when the banking sector has remained bogged with a record size default loans of Tk 54,657 crore mainly from the state owned banks and non-banking financial institutions until March this year. It includes Tk 22,654 crore loans of Sonali, Agrani, Janata and Rupali banks, in addition to Tk 7,417 crore of three specialised public banks and 39 private and 11 foreign banks. Meanwhile past governments have written off Tk 37,252 crore to the benefit of borrowers.
It is noticeable that the state owned banking sector is gradually sinking in absence of strong political will of the government to put pressure on powerful borrowers and recover the defaulted loans. Meanwhile politicization of bank loans and unbridled corruption in public banks have criminally slowed down the loan recovery process.
It is true that many developed countries engage specialized loan recovery agents to chase the defaulters and force them to repay. But in our situation who else is more powerful than the government to force parties to repay. If the government fails, no one will be able to produce result. So many people voice skeptical on the move fearing that in fact the government may be trying to shed its responsibility and the responsibility of state owned banks by trying to hand over the task to private parties. But as it seems in our situation big borrowers will give damn to private recovery agencies and even if they make some recovery, the money may not be back to the banks because people fear that agencies will be selected on political consideration and they will make good use of the political cover.
Some argue that public banks are unable to pay due attention to loan recovery, so handing over responsibility is a good way of pressing the recovery with defaulted borrowers. But to any sane person loan giving and recovery can’t be and should not be separated. What is most conspicuous here is the absence of accountability at the senior bank management level and lack of punishment for those who knowingly approve faulty loans to fake parties. If recovery is not equal responsibility, in our view approval of more loans to faulty business project will continue, because the board or the officers concerned would know that they have not to face any accountability at any level. Such opportunity would only encourage more bad loans at the end as it appears in case of Sonali Bank or BASIC Bank.
Here the role of the central bank as a regulatory body is more important. How can it hand over the default loan matters to the ministry for decision instead of asserting its position forcing public banks to recover loans or face the accountability, is a big question.
