Those who did not repay loans from banks had resorted to fraudulent practices, says a Bangladesh Bank report. These unscrupulous people showed false or lowly priced collateral which the banks could sell to recover their money, added the report.
The fraud was carried out in three ways: many showed false collateral, in some cases, the same collateral was presented at different banks and, in most cases, the price of the mortgaged asset was inflated.
A spokesperson for Bangladesh Bank, Sirajul Islam, said: “Banks are being monitored to recover loan defaults and from now on they will inspect the collateral thoroughly before handing out loans.”
To prevent further fraud, an information bank is being formed. Once it is in operation, the tendency to take loans from several banks, showing the same collateral, will stop, he hopes.
The price of collateral is inflated due to a collusive practice between the bank and the client, the report adds.
Former governor of Bangladesh Bank, Salehuddin Ahmed, said: “There are some unethical bank officials linked to the practice of handing out loans without proper assessment.”
The offenders need to be punished. Once that is assured, the tendency to default on loan payment will fall, he says.
Last year, the amount of default loans rose by Tk 220 billion. In June 2018, the figure was Tk 903.72 billion which stands at Tk 1124.25 billion in June 2019.
In this situation, banks are tilting towards re-scheduling. Clients who are failing to pay back loans are given a chance to reschedule.