Spl banks, FIs pay scant attention to written-off loans

The state-owned specialised banks and financial institutions (FIs) are making little effort to recover their written-off loans worth billions of taka, data showed.

Up to March of the outgoing fiscal year (FY), five specialised banks and FIs recovered only Tk 100 million against their combined written-off loans of Tk 6.21 billion.

Loans, which have little prospect for collection, are written off by banks to clean up their balance sheets. Yet the relevant institutions are required to make serious efforts to recover the same.

Until last July, the Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB), Karmasangsthan Bank, Ansar VDP Bank, and Investment Corporation of Bangladesh (ICB) had such an amount.

The financial institutions division (FID) under the ministry of finance at a recent meeting found the steps to recover the loans to be "inadequate" and "ineffective".

In the meeting with chief executives of banks and financial institutions, the division top brass asked them to step up recovery drive.

Among the specialised banks, the BKB had the highest amount of written-off loans -- Tk 2.21 billion. During nine months of the outgoing fiscal, the bank could recover only Tk 83 million.

The RAKUB had Tk 1.27 billion written-off loans in July last, of which it could recoup only Tk 14 million.

The ICB had Tk 2.63 billion written-off loans and until March it could recover a minuscule Tk 0.5 million.

The Karmasangsthan Bank had Tk 64 million, of which it got back only Tk 2.1 million until March.

The Ansar VDP Bank recovered Tk 0.5 million against its written-off loans of Tk 34.8 million.

Contacted over telephone, ICB managing director Kazi Sanaul Hoq told the FE that these written-off loans date back to the 1990s.

"Most of the borrowers are dead and even some of the companies no longer exist. Recovering the money from them may not be possible," he said.

BKB managing director Ali Hossain Prodhania told the FE usually the loans that have little possibility of recovering are written-off.

However, he said, those can be recovered with constant efforts.

Mr Prodhania said loans are written off to 'clean up' the balance sheets though there is always a condition of making serious efforts to recover the same.

Replying to a question, he said no loans were written off during the last two to three years at BKB.

The bulk of written off-loans was owed by people who lost their homes and lands due to river erosion and natural disasters like Sidr and Aila and some microcredit borrowers, he said.

Many of those borrowers are now traceless, but "our efforts are there to recover the loans," he said.

Former governor of Bangladesh Bank Dr Salehuddin Ahmed told the FE on Friday the volume of recovered written-off loans is in no way satisfactory.

"It unacceptable that banks will reduce their recovery effort once loans were written off," he said.

"It's a total failure," said the former central banker.

Dr Ahmed said the Bangladesh Bank recently lowered the required tenure for bad loans to be written off from the balance sheets to three years from the previous five years.

"Bankers take the advantage of the central bank's flexibility and don't put in efforts to recover the written-off loans," he said.

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