Making money loan court effective

The classified loans in the country's banking sector have soared to an all-time high of Tk 4.20 trillion as of March 2025, now accounting for 24.13 per cent of total outstanding loans. This staggering volume of Non-Performing Loans (NPLs) and its continued rise are weighing heavily on the financial sector and giving rise to serious concern about the overall state of the economy. In such a situation, one would expect the Artha Rin Adalats, or money loan courts, to take the lead in recovery efforts of this massive amount of defaulted loans by tightening the noose against loan defaulters. Regrettably, however, these courts themselves are limping due to acute manpower shortages, resulting in a huge backlog of cases involving billions of taka. To make matters worse, arrest warrants issued by the money courts against loan defaulters often go unexecuted, leaving both the cases in limbo year after year. 

Against this backdrop, the Financial Institutions Division (FID) has recently sought the Home Ministry's intervention to execute arrest warrants in 1,025 long-pending loan default cases accounting for huge sums of money, according to a Financial Express report. These cases were filed by eight departments and agencies under the FID, but due to the non-enforcement of the arrest warrants, recovery of default loans is delayed. The move is part of the FID's special drive to settle the top 100 cases involving state-owned banks, insurance companies, financial institutions and regulatory bodies, amounting together to around Tk 380 billion. However, this figure only represents the top 100 cases filed by government banks and agencies. The enormity of the backlog in money loan courts is evident from a report by the Task Force on Economic Reforms, which stated earlier this year that as of February 2024, more than Tk 1.78 trillion was held up in over 72,500 cases pending in money courts. The report identified the huge backlog under the Money Loan Court Act and the Bankruptcy Act as a major obstacle to loan recovery. Structural flaws in the Money Loan Court Act 2003, a low judge-to-population ratio and insufficient courtroom facilities continue to hinder the timely resolution of NPL-related cases.

For the money loan courts to function effectively, necessary reforms must be implemented urgently. First, the number of courts should be increased, more judges need to be appointed and the regular presence of judges and staff must be ensured. Moreover, a specific time frame for the disposal of such cases should be introduced. The enforcement of court-issued warrants must also be ensured. It is both surprising and concerning that the Finance Division has to seek Home Ministry intervention to execute judicial warrants. Given the gravity of the default loan crisis, law enforcement agencies must take prompt and coordinated action in this regard.

Then, the Artha Rin Adalat Ain itself requires reform to make the recovery process more efficient. Loan defaulters often exploit loopholes in the law to delay repayment. It has been observed time and again that defaulters obtain stay orders from higher courts against money loan court verdicts only to keep the cases suspended for years. Experts have suggested introducing a provision requiring borrowers to deposit a certain portion of their total loan amount before filing a writ petition against the orders of the money loan courts. Such a measure could help deter abuse of the legal process and strengthen the culture of repayment. The economy cannot afford to carry the burden of mounting defaulted loans any longer. Enhancing the effectiveness of the money loan courts and plugging loopholes in legal framework are of paramount importance to restore discipline and trust in the banking sector.