Overhauling legal framework crucial to cutting troubled loans: Experts

Classified credit soars Tk 741.48b in Apr-Jun

FE Team | Published: October 06, 2017 22:43:54

Reforming the legal framework is essential for reducing the non-performing loan (NPL) as it is increasingly becoming a matter of concern for the banking sector, said experts.
"There are some borrowers who become defaulters willfully. They try to take the advantage of the weakness of the law. Bangladesh's 'Artha Rin Adalat Ain' needs to be reviewed so that defaulters cannot take the advantage," Research Director of the Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem said on Friday, reports BSS.
He said that the slow pace of legal actions encourages the borrowers to be defaulters as they can take time to pay off their debt.
"If a bank takes legal actions against any defaulter, he or she goes to court and files a writ petition against the bank. The defaulter can also make the process lengthy through filing an appeal against the judgment. In this way, that person kills time," he added.
Talking about the issue, World Bank (WB) Lead Economist Zahid Hussain urged the authorities concerned to reform the existing laws and said banks should disburse credit after assessing the value of the relevant assets to reduce the risk of bad loan.
"Banks should take more resolute measures to recover the huge amount of NPL for maintaining the pace of investment flow. Bankers should consider the financial condition of the borrowers while sanctioning credit," he added.
He called for taking necessary actions against the big debt defaulters so that any large loan does not turn into a bad loan in future.
According to Bangladesh Bank's (BB) latest data, the amount of classified loan soared to Tk 741.48 billion (74,148 crore) during the April to June period from Tk 734.09 billion in the previous quarter.
National Credit and Commerce (NCC) Bank Chairman M Nurun Newaz said bankers should gear up their efforts to bring down the NPL at a tolerable level.
"One of the major tasks of a banker is to give credit and recover it. He or she should put all sorts of efforts in loan recovery," he added.
He urged the bankers to develop a healthy banking system by analysing the customers' status properly while processing a loan.
Mutual Trust Bank (MTB) additional managing director and chief operating officer (COO) M Hashem Chowdhury said bankers should increase their concentration on the retail and Small and Medium Entrepreneurs (SMEs) credit as the rate of recovery in the sector is better than the corporate credit.
He also sought cooperation from the borrowers to bring the NPL down to a tolerable level.