Loads of bad loans caught on legal tenterhooks continue to go ballooning, amounting to over Tk 1.5 trillion by now, which economists say weakens Bangladesh's banking system.
Mal-governance, poor capacity, insufficient money loan courts, protracted case proceedings and stay orders are on a long list of drawbacks attributed to this logjam of unsettled cases.
Bangladesh Bank (BB) data obtained until June 2022 show the number of cases pending with Artha Rin Adalats (money loan courts) as 69,369 by then against huge dues, as claimed by banks, amounting to Tk 1.53 trillion.
The volume of such dud money keeps swelling with the passing of time, also for reasons like loan forgeries and lack of due diligence on part of some banks under overall prevailing ambiance.
Earlier, until December 31, 2021, the central bank data had shown the number of cases pending with the money loan courts at 68,271 against the dues claimed by banks at Tk 1.43 trillion.
According to the BB statistics, the number of cases pending with such courts was 36,772 until 31 December 2009, while the amount claimed by different banks stood at Tk 220.24 billion.
The country's banking system is suffering from a grave setback with the outrageous rise in defaulted loans as it fails to recover such bad debts in time through because of prolonged legal battles, the economists and analysts say.
They, as such, suggest that the government take prompt policy actions, fix legal loopholes and do required judicial reforms to accelerate loan recovery and ensure exemplary punishment for bad debtors.
All parties concerned should work in unison to popularise arbitration or alternative dispute resolution to smoothly settle the disputes, they also suggest.
The loan courts, which were set up in 2003 to help expedite resolution of disputes between banks and their clients over loan repayment, are overburdened and seem to be losing gear.
Khandaker Sumon (not his real name), who earlier worked at legal department and now works at a specialised state bank headquartered in Dhaka, laments that bank officials who lack legal knowledge and proficiency were given the onus of recovering this colossal amount.
His bank's supervision on the disputes with money loan court is "in a dismal state as most of the officers looking after those cases are not sound and proficient in legal matters", he tells the FE.
Of the settled cases of the bank from 2009-2019, verdicts on nearly 60 per cent were served against the bank for a lack of legal proficiency and capacity of related bank officials to run the lawsuits, he says.
Some 19,652 certificate and 5,258 money-loan disputes and 36 writs with the High Court were still in queue for three or more than three years for disposal, Mr Sumon adds.
Among the pending cases, a total of Tk 46.10 billion had been realised by different courts across the country until December 2021.
As of December 2021, after the formation of the money loan court, a total of 207,896 cases were filed with the court against the amount claimed being over Tk 2.13 trillion.
Of the total cases, 139,625 were settled and Tk 197.03 billion was recovered by different courts across the country as of December 2021, while the amount claimed by the banks was Tk 700.41 billion back then.
After the establishment of the money loan court, the six state-owned commercial banks lodged 82,030 cases with the money loan courts and had funds worth over Tk 1.05 trillion stuck up in toils of the law.
The specialised banks had filed 36,558 lawsuits involving funds estimated more than Tk 51.72 billion as of December 2021.
The private banks flied 79,418 cases with the courts, involving an amount of over Tk 1.0 trillion as of December 2021.
"The government should suspend citizens' services to loan defaulters like passport seizure and barring further loan sanction from other institutions after giving them a certain timeline to repay loans," the professor on bank board concludes on how to tighten the noose round the neck of bad borrowers.
Syed Mahbubur Rahman, Managing Director (MD) and CEO of Mutual Trust Bank, feels that the lengthy proceedings for recovering the default loans by legal means are putting most of the banks at stake and leaving them helpless.
Terming the Artha Rin Adalat Ain 2003 a prolific law, he says the existing legal remedy "is not enough and always supportive to us as the loan defaulters can easily obtain their expected immunity and make the legal process longer".
Citing Section 33(7) of the Artha Rin Adalat law, Mr Rahman notes that though the provision stipulates the ownership of the property in favour of the decree-holder, it creates complications in taking possession and mutation of the property.
"As a result, the bank cannot sell the property later. Even if the bank concerned wins the legal battle in the case, the loan is not realized," he adds.
