Despite having money loan court (Artha Rin Adalat) decrees in their favour, banks and non-bank financial institutions (NBFIs) are not getting the desired success in selling mortgaged properties due to various complications.
Bank officials are reluctant to sell such properties at auction due to insufficient prices and also because they want to avoid hassles in their professional lives, according to legal experts.
In addition, buyers are also less interested in purchasing these properties due to the risk of possible legal complications, they further said.
As a result, banks and other financial institutions are not achieving the expected level of success in recovering default loans even after fighting long legal battles.
The result is obvious. The build-up of non-performing loans (NPLs) in the banking industry keeps mounting over the years, reaching a record high of Tk 3.45 trillion by the end of the last calendar year, accounting for 20.20 per cent of the total loans of Tk 17.11 trillion disbursed by commercial banks, according to the Bangladesh Bank data.
Court officials said although each of the four money loan courts in Dhaka disposes of an average of 1,500-2,000 cases every year, properties involved in only three to four are sold at auction in that period. The rest remain unsold for years.
Nurul Huda, head clerk of the Money Loan Court-4 in Dhaka, told The Financial Express properties involved in only three to four cases are auctioned annually. Mohammad Shahadat Hossain, head clerk of the Money Loan Court-3 in Dhaka, said the same.
The money loan courts were formed in 2003 to expedite the resolution of disputes between banks and their clients over loan repayments. But a lender has to go through many steps to auction a property mortgaged against a loan.
When a loan is sanctioned, the bank or NBFI keeps a security, whether it is movable or immovable property, against it. When the borrower defaults on the loan, the lender tries to auction the mortgaged property.
If it cannot sell the property at auction, it goes to court. It also goes to court if it fails to recover the entire amount by auctioning the property.
After filing a case, the lender gets a decree, which has to be executed again. When that happens, the property is auctioned again through the court.
Imran Ahmed Bhuiyan, a Supreme Court lawyer who regularly deals with such cases, said banks and other financial institutions have to change their strategy to achieve significant success in selling mortgaged properties at auction.
"They have to be prepared to sell those at prices slightly lower than the market value. Otherwise, buyers will not be interested. This is because buyers exercise caution while buying such assets as they may face legal complications in the future," he explained.
The lawyer believes the Bangladesh Bank must take special initiatives in this regard. Otherwise, default loans cannot be recovered properly, which will then leave banks in a crisis.
"Those buying such properties at auction have to be given an opportunity somehow. Then they will be interested in making purchases. When that happens, many of the mortgaged properties will be sold. As a result, a large amount of default loans will be recovered," Bhuiyan further opined.
A total of 23,782 cases were pending in 67 money loan courts across the country until December 31 in 2024, according to the Supreme Court statistics. Of the 67, the four courts in Dhaka handle the majority of the cases and auctions. In most cases, money loan courts are failing to complete trials within the stipulated time - a maximum of 150 working days mandated by the money loan court act 2003.
Usually, such a case takes a minimum of two years to become mature. As per Supreme Court data, 3,391 such cases have remained pending in the courts for more than five years.
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