Blame game over default culture  

Shamsul Huq Zahid      | Published: November 22, 2018 22:29:23 | Updated: November 23, 2018 21:20:20

One has ample reasons to get confused by the statements made from time to time by men of authority about banks and banking practices. Their actions and statements would remind people of one saying in Bangla, "Sarpo hoiya dangsan karo, ojha hoiya jharo". The adage is generally used to explain 'double standard'.

Early this week, Finance Minister AMA Muhith blamed bankers for promoting 'default culture' by their non-cooperative approach to borrowers.

'I noticed you people (bankers), after offering one instalment of loan to a party, try to make him a defaulter. You create a situation so that he becomes a defaulter", Muhith was quoted as saying at the inaugural ceremony of a five-day orientation course for the directors of the state-owned banks.

The finance minister also spoke against the offering of rescheduling facility to the same loan again and again and felt the need for putting a cap on the number of rescheduling facility for any classified loan.

Mr. Muhith was right, to a large extent, if the officials of the state-owned banks were the targets of his statement. Though private and foreign banks do have default loans, their officials are not as irresponsible as their counterparts are in the public sector banks.

Undeniably, some irregularities are there in disbursement of loans in private banks. But the boards of these banks would not allow any official to continue in his/ her job if he or she is found promoting default culture, deliberately.

The size of classified loans in state-owned banks is huge. The accumulation of such loans has been possible mainly because of mismanagement, corrupt practices and lack of oversight.

Clients of the state-owned banks often allege harassment at the hands of officials at different levels. Harassment is more in the case of loans. The finance minister was right in pinpointing the non-cooperative approach to the borrowers in particular. Many projects financed by the public sector banks have become sick because of the delay in loan disbursement. Such sickness has resulted in non-repayment of the borrowed money to the banks concerned.

But the government itself would have to share a part of the blame. The public sector banks do often extend many loans to borrowers having ill-reputation coming under pressure from the government. It is hard to believe that the finance ministry is unaware of such pressure.

Moreover, the government appoints persons as directors under political consideration.  These directors, at times, try to influence many loan decisions that might prove to be injurious to the financial health of banks. Besides, they also very often meddle in banks' administrative affairs.  All these combined create an atmosphere that helps promote irregularities, financial or otherwise in any organisation.

 The oversight part in the public sector banks has always been weak. People who sit on the boards do not have any personal stake in the banks concerned. Some high government officials and a few people chosen by the government sit on the boards of these banks. They take little interest in either performance of the bank officials or financial health of the banks concerned. There may be a few exceptions. But that does not make any difference.

The rescheduling facility extended to holders of classified loans, in fact, has lost its utility because of its widespread abuse. Banks have been allowing many defaulters the facility time and again as part of their bid to hide the actual shape of their loan portfolios. But while doing so, they have been making the borrowers more delinquent.  A section of delinquent borrowers have developed an expectation that banks would ultimately extend them rescheduling facility. However, it is hard to blame the errant borrowers for developing such an attitude when many loan sharks are enjoying great relief under the so-called loan restructuring facility.

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