Banks seek travel ban on loan defaulters, want names and photos made public

Banks have demanded a set of reforms to tackle the growing crisis of defaulted loans in the banking sector.

The demands were raised by the Association of Bankers Bangladesh (ABB), an organisation of bank chief executives.

The organisation has made a proposal to Bangladesh Bank that loan defaulters should not be allowed to travel abroad without court approval.

At the same time, it has sought permission to publish the names and photos of loan defaulters. It has also demanded that loan defaulters be barred from contesting elections of any business organisation.

As a follow-up to a meeting with Bangladesh Bank Governor Ahsan H Mansur on 12 November last year, ABB has submitted this detailed proposal.

The main objective of the proposals is to reduce defaulted loans and increase cash recovery.

ABB has raised a number of demands to curb defaulted loans. The demands were made in a letter signed by ABB chairman and City Bank managing director Masrur Arefin. The letter has been sent to Bangladesh Bank.

Three proposals have been made to reduce defaulted loans. These are:

1. Allowing partial write-offs of defaulted loans in line with international standards.

2. Ensuring immediate cooperation from the relevant authorities in cashing in liened shares.

3. Relaxing the condition of taking opinions from the head of ICC to enable faster loan recovery through interest waivers on personal loans, home loans, credit cards, or loans of sole-owned cottage, micro and small enterprises of individuals affected by death, terminal illness or natural disasters.

There are three proposals for cash recovery. These are:

1. Imposing a ban on foreign travel by defaulted borrowers without instructions from banks or courts.

2. Granting banks permission to publish lists of defaulted borrowers with names and photos.

3. Declaring defaulted borrowers ineligible to participate in elections of any business association.

The proposals on the sale of mortgaged assets are:

1. Withdrawal of all income tax and VAT on the transfer of properties sold or purchased through bank auctions.

2. Providing income tax rebates or other incentives to auction buyers to encourage the purchase of auctioned assets.

3. Abolishing the requirement for approval from the deputy commissioner for purchasing auctioned assets in certain areas.

4. Ensuring maximum cooperation from the relevant sub-registry offices in transferring ownership of auctioned assets.

5. Ensuring all facilities for banks to complete land rent payments and surveys in the absence of mortgagors to facilitate auction sales.

6. Ensuring automatic and cost-free completion of mutation and deed execution for land transferred to banks by court order under Section 33(7) of the Artha Rin Adalat Act.

The proposals on enforcement of verdicts are:

1. Ensuring immediate access, without court intervention, to information on deposits and savings certificates held by defaulted borrowers and guarantors at banks and financial institutions, ownership details of assets, income tax return information, heir certificates, birth certificates, death certificates and passport information.

2. Imposing a condition of depositing a fixed amount as down payment when approaching courts against any action taken by banks or courts.

3. Legally scrapping the facility of obtaining stay orders from the higher courts against CIB reports.

4. Ensuring conditions in stay orders issued by higher courts that require significant instalment-based payments, and considering such stay orders cancelled automatically if the directives are not complied with, without further court intervention.

5. Ensuring hearings of both parties before issuing stay orders by the higher courts.

6. Immediately establishing separate Artha Rin courts in districts with a high number of defaulted borrowers.

7. Implementing arrest warrants against defaulted borrowers at police stations on an urgent basis.

8. Ensuring arrest warrants are sent from courts to police stations within seven days.

9. Scrapping the opportunity to conduct Artha Rin cases without personal appearance.

10. Increasing the duration of civil detention in Artha Rin cases from six months to up to seven years, depending on the loan amount.

11. Formulating the proposed amendments to the Artha Rin Act within the shortest possible time.

The proposals to prevent an increase in defaulted loans are:

1. Urgently publishing a list of land surveyors and valuers through the central bank.

2. Ensuring easy verification of mortgaged asset lists at registry or treasury offices.

3. Creating a database of personal assets similar to the CIB database and ensuring easy verification.

According to banking sector sources, more than one-third of the total loans disbursed by banks in the country have now become defaulted. The total volume of defaulted loans has reached around Tk 6.5 trillion.

As of last September, the total amount of loans disbursed by the banking sector stood at Tk 18.04 trillion, of which 35.73 per cent has now turned defaulted.

Bankers say that during the tenure of the ousted Awami League government, there was a tendency to understate defaulted loans, which is no longer the case, and as a result the true picture of defaulted loans is emerging. They say the default rate is likely to rise further in the coming days.