Mohammad Shahabuddin Alam, owner of SA Group, is among many businessmen who could manage loans worth billions of taka from a number of banks but, later, defaulted on repayments, deliberately or otherwise.
According to a newspaper report, Mr. Alam himself a director of a private commercial bank has taken loans worth about Tk 30 billion from different banks for one and a half dozen business establishments owned by him. Now, the banks concerned are finding him non-cooperative as he is, allegedly, not repaying the loans.
The relevant banks are in big trouble as they had offered funds to Mr. Alam, in many cases, without collaterals or the same only in name. Under the circumstances, banks are worried that they would lose a hefty sum. Even loan-restructuring facility granted to this business house in 2015 has gone in vain.
What is more worrying is that the SA Group has appealed for liquidation of one of its large entities under the bankruptcy act. Though the relevant banks have contested the liquidation bids and got verdicts in their favour, they are unlikely to get back their money.
The most striking feature of the plundering of bank funds is that S.A. Group does also belong to the city of Chattogram, the business capital of the country.
Chattogram, to be honest, has become a death-trap for banks that are particularly aggressive in their lending. Some big borrowers have already melted into thin air to escape payment of bank loans and some others are proved to be habitual defaulters. No amount of persuasion by banks to retrieve their funds has worked.
However, there are scores of good borrowers in Chattogram, as in other places, who have been maintaining an excellent bank-client relationship.
But the current state of banks' lending has, to some extent, dented the image of Chattogram as a business hub.
According to a report published in a vernacular business daily, the volume of classified loans of all banks in the port city, as of 31st December, 2017, was around Tk110 billion. The amount is the aggregate volume of non-performing loans shown in the banks' balance-sheets. But, there exists an amount of NPL that banks do not mention in their financials.
The taskforce on NPL estimates that the actual amount of classified loans in Chattogram would be more than 250 billion. The amount includes the written-off loans and loans that are stuck in court cases.
Bulk of the credit disbursed by banks and financial institutions goes to two major cities---Dhaka and Chittagong, the two main hubs of all formal economic activities. So, the volume of default loans, naturally, will be higher in these cities. But what appears most disturbing is that the actual rate of default in the banking sector is found to be unusually high, almost double the rate estimated on the basis of information furnished in the banks' balance-sheets.
There is no denying that banks are in the soup as far as classified loans are concerned in both Dhaka and Chittagong. Crooks posing as businessmen have always tried to cheat financiers and their other targets. It is the duty of the banks to be diligent in the selection of borrowers. The banks do also need to protect their funds given as loan by securing quality collaterals. Deviation from this set path does only bring disaster. That is what is happening now in the case of many banks. Political patronage of the delinquent borrowers is another issue that, however, remains beyond the control of banks.
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