A hefty amount of over Tk 1.70 trillion of different banks remained stuck in 0.127 million money suits while a good number of them are facing liquidity crunch, sources said.
Officials said the banks are fighting a losing legal battle in the cases long pending with different courts, including Artha Rin Adalat (Money Loan Court), as the defaulters take recourse to different byways.
The substantial outstanding sum with no returns has put the banks in dire straits, posing a risk of liquidity crisis now. The government is worried about such debt crisis in the banking system, they also said.
Bankers say their efforts to recover the dud money through filing cases against the loan-defaulters do not see success -- the banks are getting caught in a loss- incurring cycle.
A good number of banks are facing various problems, including capital shortage, failing to get the cases settled year after year. Corruption is just an add-on, they mentioned.
The scheduled banks sued defaulters for recovering the loans. But it takes a long time to settle due to different complexities. On the other hand, generally, the clients concerned move writ in the High Court following verdicts issued by the loan court in loan recovery cases. All this prolongs the recovery process, a top private banker said, preferring anonymity.
The client gives a power of attorney on mortgage asset during taking loan from any bank. The bank concerned cannot sell the asset due to legal complications. Banks in most countries, including the USA and the UK, can sell off the mortgaged asset of a client, excepting Bangladesh, he added. Banks here can do it only with orders from the courts.
The banker suggested that the existing law on collateral should be amended to reduce default on debts and the backlog of cases against defaulters.
Any bank can sue a defaulting client in the loan court according to the existing policy after a stipulated time. Most of the time, however, cases run year after year.
Considering such a situation, the central bank has allowed banks to collect small default loans below Tk 50,000 without filing a case, a banker at a state-run bank said.
"It is very difficult to recover any loan if the loan is not disbursed properly. A good amount of banks' loans was not disbursed in correct way. For this, the banks concerned have taken legal measures to recover the loans. But they cannot recover the loans," said former Bangladesh Bank deputy governor Khondkar Ibrahim Khaled.
There is no proper planning in this regard. The banking sector will be faced with serious problem if the government does not change its present policy for the sector. And a proper plan should be taken to recover the stuck-up money, he added.
He suggested forming a responsible and strong committee powered by an action plan for recovering the loans stuck under the load of cases.
A total of over 0.127 million different types of cases involving over Tk 1.70 trillion were filed against the clients for non-payment of loan lent out by all the banks and non-bank financial institutions, according to the Bangladesh Bank (BB) statistics.
According to BB statistics, until last December, five state-owned commercial banks and three specialised banks had over Tk 588.67 billion stuck in 26,358 cases pending with different courts.
Thirty-nine private commercial banks (PCBs) have Tk 797 billion trapped in 58,015 cases while 10,127 cases involving over Tk 61.66 billion have been filed by the 33 private non-bank financial institutions, the data showed.
Under some 516 cases involving over Tk 253 billion, the court concerned issued orders for not branding the borrowers concerned as defaulters by the credit-information bureau (CIB) of BB.
Since inception, 134,627 cases have been filed with the different courts and Artha Rin Adalats. And until April 2015, some 94,413 cases had been settled with the recovery of Tk 107.68 billion.
"We are trying to reduce the number of cases and recover the loan with help from the government and the central bank," a high official of one SoB told the FE recently.
The central bank reviews the number of pending cases, settlement and filing of new cases, he added.
"The process of settlement of money suits is very complicated and lengthy," he further said, adding that the slow rate of settlement of cases and the filing of new ones have led to the piling up of a large number of money suits in the courts.
Besides, they are repeatedly requesting the bank authorities to lessen the number of cases and to be cautious while granting new loans, he mentioned.
Officials of different state-owned and private banks are seeking help from the administration in settling the pending loan cases, sources concerned said.
When contacted, Managing Director of Agrani Bank Mohammad Shams-Ul Islam said, "We need a special tribunal for settling the long-pending cases of different banks. If otherwise, the pending cases' complexities will increase day by day."
Under the circumstances, the bankers have adopted an alternative approach to disposal of the loan-default cases, which involves bank-client rapprochement.
"Currently, we try to recover any default loan outside court. For this, we are now reluctant to recover any default loan through legal process as recovering default loans through legal battle is a time-consuming factor," said the MD.
He thinks that it would be better for the banking sector if a separate special tribunal is constituted in the country.
The 'default culture' has gone far deeper during the last nine years, putting the banks in dire straits, a member of the Association of Bankers, Bangladesh (ABB) said.
"A large amount of money has remained stuck with borrowers from which we are not getting any profit for many years. But we are paying interest to the depositors. It is causing loss to the banks," he said.
Currently, the banks are severely suffering from liquidity shortages and facing difficulties in doing business.