Increasing loan defaults has been a constant matter of concern in the banking sector. In an attempt to get to the root of the matter the Bangladesh Bank (BB) is now on the look-out for the ringleaders of loan defaulters.
Sources said that the central bank primarily probe 60 top loan recipients across three banks.
It has formed a probe panel led by one of its general managers. In addition to that three special panels have been formed to specially monitor those three banks.
The relevant committees have been directed to file their probe reports within 10 working days.
State-owned Janata Bank and private commercial banks, AB Bank and Al Arafah Islami Banks have been selected by the BB probe committees.
From these banks, the committees will select five loan recipients from each of the following categories: top loan defaulters, people with most number of loan rescheduling, people whose interests have been written off, and five people who have been written off as bad debts.
The committees are responsible for making suggestions on what steps to take against intentional defaulters and decrease loan defaults.
On Feb 25, central bank Governor Fazle Kabir said that not only irregularities but high expectations from loan recipients also play a part in putting the banking sector at risk.
He added that influential defaulters and irregularity of officers are collectively putting the economy at risk.
“The banking sector lacks good governance,” says former governor Dr Salehuddin Ahmed.
He added that good governance, crackdown on corrupt officials and order is the key to bring back the sector from risk.
Sources said that the directors of the banks will be probed as well as there are allegations that they are taking random loans. Moreover, many of these top officials collude to take loans from other banks. These loans are often unpaid and the books messed with. This has made a significant contribution to the alarming rise in loan default.
Moreover, foreign funds brought in through banks will be proved. Emphasis will be given on accountability of the funds and whether they were used in proper means or laundered.
Teams lead by BB Financial Integrity Department Director General Shafiqul Islam will be sent to each bank.
The four member committee for Janata Bank will be led by Deputy General Manager (DGM) Asim Kumar Chowdhury. Central bank DGM Golam Mahmud will head AB bank’s three member panel and DGM Rukunuzzaman will head the Al Arafah Islami Bank panel.
The committees will probe and monitor loan distribution, documentation, monitoring, value of security amongst many other things.
The will investigate the evaluation of the bank’s credit risk management and whether they soundly monitored the loan later.
Bangladesh has had 266,118 loan-defaulting individuals and companies until Dec 2018, Finance Minister AHM Mustafa Kamal told the parliament last week.
The six state-owned banks have over Tk 442.89 billion in combined defaulted loam as of September 2018, according to him.
Of the amount, the Sonali Bank topped with Tk 125.26 billion, followed by Janata Bank with Tk 122.22 billion, BASIC Bank Tk 84.41 billion, Agrani Bank Tk 56.48 billion, Rupali Bank Tk 48.7 billion and Bangladesh Development Bank Tk 7.79 billion.