Five state-owned banks collectively recouped Tk151 crore from their written-off loans in the first nine months of this year, which is only 8.89% against the annual target of Tk1,697 crore.
The lenders are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank and BASIC Bank.
Bankers and legal experts said a lengthy legal process, coupled with an inadequate number of money loan courts, are the key barriers to recovering the delinquent loans.
According to the Bangladesh Bank, Sonali Bank had around Tk7,000 crore stuck with the money loan courts until December last year. The lender set a Tk696 crore recovery target from the written-off loans for 2021. But it could recoup only Tk81 crore in nine months of the current year.
The write-off is a tool that allows banks to clean their balance sheet by removing bad assets. Lenders have to keep 100% provisioning against delinquent loans. Banks have to file lawsuits against the defaulters before writing off loans.
By the end of last year, Janata had Tk3,500 crore caught in legal tangles as the lender targeted to recover Tk352 crore this year. The lender's recovery is Tk37 crore in the first nine months of this year.
During this time, the remaining three state-owned lenders Agrani, Rupali and BASIC Bank recouped Tk28 crore, Tk4 crore and Tk1 crore.
Company law expert Barrister Tanjib-ul Alam said defaulters often rush to the High Court seeking stay orders on lawsuits filed by the banks. Besides, the trials are often delayed without any reason. Moreover, since many judges at money loan courts do not have proper training, the cases take too long for disposal.
He suggested measures by the banks aiming at removing the HC stays, and a crucial role by the central bank in this regard. "There should be a list of stayed cases to be submitted to the chief justice through the law ministry. Upon discussion with the chief justice, the ministry can undertake necessary steps," he noted.
He also advocated for increasing the number of money loan courts and providing the judges with adequate training.
Salehuddin Ahmed, former governor of the Bangladesh Bank, said defaulters want their bad loans to be written-off so that they can cash in on the lengthy legal battle.
"Basically, the big industrial groups in Bangladesh are ripping off the loan write-off facility. They also own the banks, which deters stringent action at the end of the day," noted the ex-governor.
"If the courts could have settled some major cases with exemplary actions, the trend would decline," he added.
According to the central bank, defaulted loans in the banking sector surpassed Tk1 lakh crore in September this year, while the five state banks contributed to more than Tk43,000 crore, or around 42%.
Amid the Covid pandemic, banks did not label any of the borrowers as loan defaulters even though they had not repaid a single penny last year. The facility went away in January, but there have still been some good windows for the borrowers in repaying the banks.