Bad loans are now a thorn in the neck of the banking sector. The banking sector is riddled with irregularities and due to this the foundation of this important sector is gradually weakening. Mainly irregularity, fraud, fraud, political influence in granting loans, political patronage of defaulters, lengthy process of trial, lack of good governance, loose control of central bank etc. defaulting loans are going out of control due to many reasons. Due to this, the inflated size of defaulted loans is a big threat to the country's banking sector, business and economy. According to the latest data of Bangladesh Bank, defaulted loans increased by Tk 10,964 crore from January to March this year and in the last one year from April 2022 to March 2023, defaulted loans have increased by Tk 18,180 crores. At the end of March of this year, the total loan in the banking sector in the country was Tk 14,96,346 crore and out of this defaulted loan was Tk 1,31,620 crore, that is, now 8.80 percent of the bank loan is defaulted. Last December, defaulted loans were Tk 120,656 crore or 8.16 percent, which is a worrying figure for the country's economy and banking sector.

According to the media, Bangladesh has the second highest non-performing loan rate among South Asian countries and this rate is 8.80 percent. Sri Lanka is at the top and the rate is about 11 percent of the country's total debt. Nepal has the lowest default rate at less than 2 percent. According to the recently released World Bank Regional Economic Report on South Asian countries, non-performing loans in Bangladesh are increasing at an alarming rate due to high import costs, regular loan defaults by borrowers and weak oversight by regulatory agencies. Analyzing the data of defaulted loans, it is known that the amount of defaulted loans in Bangladesh has increased more than six times in the last 13 years. In 2009, the size of non-performing loans in Bangladesh was about Tk 22,000 crores, according to the latest data of Bangladesh Bank, currently the amount of non-performing loans in the country stands at Tk 1,31,620 crores. However, according to the International Monetary Fund, this amount is around Tk 3 lakh crore. Because doubtful loans, loans under court order suspension of default, rescheduled and restructured loans are also treated as defaulters. Moreover, at present, almost a quarter of a lakh cases of defaulted loans are pending in the courts of the country, in which 1.66 lakh crores of Taka are stuck.

In fact, those who have defaulted on large sums of debt, have never been heard of exemplary punishment. Bangladesh Bank is not seen to take very strict action against those who are involved in it. As a result, no one has any fear or apprehension about defaulted loans. In the last year 2019, 2 percent installments of the loan were given to keep defaulted loans regular. In that rule, 10 years are given to repay the loan, with no installments to be paid in the first year. But despite such political concessions, defaulted loans have increased instead of decreasing. Political goodwill is a big factor in this. Because the large borrowers have close contacts with the political circles and the government also takes various benefits from them. As a result, even if the commercial banks want to, they cannot take strict legal action against them for good reasons. Even in this case, many times there are examples of exemptions by amending the banking law to benefit the defaulters. In such irregularities, the central bank has a lot of powers like pulling the limit of loan disbursement, opening and closing new branches, disbanding the board of directors or taking action against the directors. But despite major irregularities in loans, the central bank is mostly silent.

According to a recent report by the BBC, many countries like Vietnam, China, South Korea have reduced default loans through strict enforcement of laws. It is undeniable that political will is a big issue in this regard. It is reported that China and Vietnam have death penalty for defaulters and money embezzlers. If the loan defaults, they cannot buy air or train tickets, nor can they use credit cards. Singapore has a maximum penalty of seven years in jail and fines for defaulting on loans. The US, UK, Canada and Australia have similar laws. In those countries, if he is declared insolvent, he cannot engage in any financial activity or buy a house, nor can he own assets. All assets in the UAE were seized on such charges. He cannot own any more assets until the debt is paid off. In South Korea, there are firms that arrange for the sale of defaulted loans to other firms, and these loans are often converted into shares to change the ownership of the company. Although many initiatives have been taken to reduce bad debt in Bangladesh, the people concerned say that there is a lack of strong political commitment that required for this.
Bangladeshi economists, people related to the banking sector and lawyers say that although there are laws in Bangladesh to recover defaulted loans, there is a lack of proper implementation. On the other hand, due to the lack of political will and firm commitment, strict measures have never been taken against the defaulters in the banking sector, rather they have always received various benefits. Economists say various irregularities and corruption due to the power and dominance of a handful of unscrupulous officials and political cabals lead to the proliferation of bad loans. If the banks could prevent the tendency of defaulting after taking loans through false information and fraud, then the risk would have been avoided. Transparency and accountability need to be ensured for this. Due to lack of accountability, there have been major loan scams in Sonali Bank, Janata, Basic Bank and other banks. In fact, defaulting on loans has become a subculture in our society. The proliferation of non-performing loans is seriously weakening the foundations of banks. In this case, political will and strong political commitment are essential to prevent such bad culture.

For this reason, there is no alternative but to increase the supervision and monitoring of the banks as well as taking strict legal action against the defaulters. If necessary, strict legislation should be considered without delay in this regard. At the same time, if discipline and good governance are not established in the banking sector, the amount of defaulted loans will continue to increase and it will cause a deeper crisis in the future. Along with the long process in settling cases, the impact of good governance is one of the major problems in the banking sector. Just as there is a need for an up-to-date law in settling cases of defaulted loans, it is also necessary to set up a special bench to settle cases. Only the settlement of these cases in the debt court has become difficult over time. There is much discussion and criticism about defaulted loans; But how much work has been done is a question. The government should ensure the safety of people's accumulated deposits through political will and consider the banking sector as an integral part of our blood circulation system.

Lastly, if the government had strong political commitment and goodwill, others would not have had such courage to pay the bank's defaulted loans. Those concerned say that it is very difficult to rein in defaulted loans without the government firm commitment and political goodwill of the government, be it intentional or unintentional.

The writer is a banker and columnist.