One Manoranjon and loan default culture
Monday, 16 July 2007
Shamsul Huq Zahid
OCTOGENARIAN Monoranjon Roy, a poor farmer of village Golna under Jaldhaka thana in Nilphamari district should consider himself lucky that a Bengali national daily front paged his arrest for non-payment of a paltry amount of agricultural loan and that none other than a person like Chief of Army Staff General Moeen U Ahmed got him released paying in full the loan along with interest.
According to a newspaper report, Monoranjon took a loan amounting to Tk 9000 from the Jaldhaka branch of the Bangladesh Krishi Unnyan Bank to buy a pair of bullocks in 1988. The bank filed a case against him in 1999 for failing to repay the loan. The court in 2006 sentenced him to suffer rigorous imprisonment for a period of six months. Monoranjon, unaware of the trial and prison sentence, was arrested from his house in the first week of this month and sent to Nilphamari jail.
Everybody was emotionally moved by the story about farmer Monoronjan Roy's arrest and his subsequent release following intervention by the chief of army staff. But the incident has brought to the fore a tale that has been told again and again in the media and in other forums. It's about high-profile bank loan defaulters who have managed to go unscathed during the rule of successive governments, democratically elected ones or otherwise.
If poor Monoranjon, an 85 year old farmer, could be sent to jail for non-payment of a loan of Tk. 9000, one can well guess the extent of prison terms the delinquent top borrowers, who have siphoned off billions of taka and made many banks financially sick, deserve.
However, until now none of the top bank loan defaulters has been sent to jail for his or her white collar crime. These defaulters have been successfully tried a couple of methods to overcome the crisis that they themselves have created deliberately. They either make arrangements with the banks concerned through rescheduling of their overdue loans or take legal cover when they find it hard to protect themselves from aggressive bank management. There are many instances where chronic bank loan defaulters with a view to delaying the actions by the bank concerned have repeatedly made rescheduling arrangements. In most cases, a defaulter regularises his or her account by paying 15 per cent of the overdue amount, manages some loan again, fails to pay the instalments of old and new loans and again goes for rescheduling arrangement. This process goes on and on much to the benefit of the delinquent borrowers. The bank management particularly that of public sector banks do very often give indulgence to this kind of borrowers out of the consideration that this, at least, help keep the prospect of getting back the stuck up bank money alive. There are, however, other sides of the story. The ministry of finance and some top managers of the public sector banks are aware of those.
The default-loan situation has improved to some extent in recent years, notwithstanding the fact that a part of it has been wiped off the balance-sheet through window dressing. Strong monitoring by the central bank and growing awareness of the bank management about default-culture have helped the banks reduce their volume of overdue loans. However, the top defaulters, apparently, have successfully escaped the net. The public sector banks that once harboured the top defaulters are failing to recover their huge stuck-up loans.
The public sector banks, according to a report, in the first three months of the current calendar year could achieve only 3.0 per cent of their respective targets of recovering the overdue loans from their top 20 top defaulters. In case of other defaulters, the progress in getting back the bank money had been encouraging. The legal process is considered a strong obstacle to the efforts for recovering the overdue loans. Whenever the banks go for tough measures, the defaulters concerned take recourse to legal means and manage stay orders from the courts. Allegations are galore that a section of officials of banks and its lawyers enter into underhand deals to let the borrowers concerned off the hook.
The top defaulters employ top lawyers in courts to plead their case since money is not a problem for them. In most cases, the lawyers appointed by the banks cannot effectively present the banks' viewpoints before the court. Moreover, there remains a serious dearth of necessary motivation in helping the banks to get back their huge funds stuck-up with the top defaulters.
The banks cannot move arbitrarily. They also have to take recourse to legal means against the defaulters. In that case, laws against wilful bank loan defaulters need to be tough and execution of the court verdicts prompt and efficient. That is the area where the problem lies.
The Money Loan Courts constituted separately to expedite the recovery of default loans have largely failed to achieve the desired objectives because most of the verdicts handed down by these courts could not be executed for both administrative and legal reasons.
There were talks in the recent past to put in place a tough law providing for direct foreclosure of assets of the defaulting borrowers by the bank. However, until now there has not been any move in this direction. The finance ministry, which is the de-facto guardian of the public sector banks that have the lion's share in the overdue loans, in consultation with the central bank should take necessary measures to address the problems of default loans through legal means.
The government is in the midst of transferring a nationalised commercial bank (NCB) to a private owner and has corporatised three others that will also be privatised sooner or later. But the move to reform the NCBs would be nothing but a futile exercise if the problem of overdue loan remains unaddressed.
OCTOGENARIAN Monoranjon Roy, a poor farmer of village Golna under Jaldhaka thana in Nilphamari district should consider himself lucky that a Bengali national daily front paged his arrest for non-payment of a paltry amount of agricultural loan and that none other than a person like Chief of Army Staff General Moeen U Ahmed got him released paying in full the loan along with interest.
According to a newspaper report, Monoranjon took a loan amounting to Tk 9000 from the Jaldhaka branch of the Bangladesh Krishi Unnyan Bank to buy a pair of bullocks in 1988. The bank filed a case against him in 1999 for failing to repay the loan. The court in 2006 sentenced him to suffer rigorous imprisonment for a period of six months. Monoranjon, unaware of the trial and prison sentence, was arrested from his house in the first week of this month and sent to Nilphamari jail.
Everybody was emotionally moved by the story about farmer Monoronjan Roy's arrest and his subsequent release following intervention by the chief of army staff. But the incident has brought to the fore a tale that has been told again and again in the media and in other forums. It's about high-profile bank loan defaulters who have managed to go unscathed during the rule of successive governments, democratically elected ones or otherwise.
If poor Monoranjon, an 85 year old farmer, could be sent to jail for non-payment of a loan of Tk. 9000, one can well guess the extent of prison terms the delinquent top borrowers, who have siphoned off billions of taka and made many banks financially sick, deserve.
However, until now none of the top bank loan defaulters has been sent to jail for his or her white collar crime. These defaulters have been successfully tried a couple of methods to overcome the crisis that they themselves have created deliberately. They either make arrangements with the banks concerned through rescheduling of their overdue loans or take legal cover when they find it hard to protect themselves from aggressive bank management. There are many instances where chronic bank loan defaulters with a view to delaying the actions by the bank concerned have repeatedly made rescheduling arrangements. In most cases, a defaulter regularises his or her account by paying 15 per cent of the overdue amount, manages some loan again, fails to pay the instalments of old and new loans and again goes for rescheduling arrangement. This process goes on and on much to the benefit of the delinquent borrowers. The bank management particularly that of public sector banks do very often give indulgence to this kind of borrowers out of the consideration that this, at least, help keep the prospect of getting back the stuck up bank money alive. There are, however, other sides of the story. The ministry of finance and some top managers of the public sector banks are aware of those.
The default-loan situation has improved to some extent in recent years, notwithstanding the fact that a part of it has been wiped off the balance-sheet through window dressing. Strong monitoring by the central bank and growing awareness of the bank management about default-culture have helped the banks reduce their volume of overdue loans. However, the top defaulters, apparently, have successfully escaped the net. The public sector banks that once harboured the top defaulters are failing to recover their huge stuck-up loans.
The public sector banks, according to a report, in the first three months of the current calendar year could achieve only 3.0 per cent of their respective targets of recovering the overdue loans from their top 20 top defaulters. In case of other defaulters, the progress in getting back the bank money had been encouraging. The legal process is considered a strong obstacle to the efforts for recovering the overdue loans. Whenever the banks go for tough measures, the defaulters concerned take recourse to legal means and manage stay orders from the courts. Allegations are galore that a section of officials of banks and its lawyers enter into underhand deals to let the borrowers concerned off the hook.
The top defaulters employ top lawyers in courts to plead their case since money is not a problem for them. In most cases, the lawyers appointed by the banks cannot effectively present the banks' viewpoints before the court. Moreover, there remains a serious dearth of necessary motivation in helping the banks to get back their huge funds stuck-up with the top defaulters.
The banks cannot move arbitrarily. They also have to take recourse to legal means against the defaulters. In that case, laws against wilful bank loan defaulters need to be tough and execution of the court verdicts prompt and efficient. That is the area where the problem lies.
The Money Loan Courts constituted separately to expedite the recovery of default loans have largely failed to achieve the desired objectives because most of the verdicts handed down by these courts could not be executed for both administrative and legal reasons.
There were talks in the recent past to put in place a tough law providing for direct foreclosure of assets of the defaulting borrowers by the bank. However, until now there has not been any move in this direction. The finance ministry, which is the de-facto guardian of the public sector banks that have the lion's share in the overdue loans, in consultation with the central bank should take necessary measures to address the problems of default loans through legal means.
The government is in the midst of transferring a nationalised commercial bank (NCB) to a private owner and has corporatised three others that will also be privatised sooner or later. But the move to reform the NCBs would be nothing but a futile exercise if the problem of overdue loan remains unaddressed.