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Source: ESPN
Save the broken banking system
Nine scheduled banks, burdened with huge amounts of defaulted loans, are now facing capital shortfall of at least Tk 16,507.38 crore. This year Bangladesh Bank officials said excessive defaulted loans in nine commercial banks had mainly deteriorated their capability of keeping required capital in line with international banking standards.
However, we had for long anticipated that this would happen anytime sooner or later. Now that the capital shortfall has erupted at a bigger scale, we want to see how the regulator — Bangladesh Bank would tackle it. Rescheduling loans should not be the norm and it also played little role in recovering non-performing loans (NPL). Just last month the BB has asked commercial banks to set targets of loan recovery from the Top-20 defaulters for 2018 – once their respective boards have been constituted. Each bank has been asked by BB to submit its loan recovery plans and therefore submit quarterly progress reports on amounts of recovered loan on a quarterly basis. Unquestionably a good decision, but our question is precisely what steps the respective banks (with highest NPLs) have taken to strengthen the mechanisms involved for loan recovery?
In fact, the BB should have gone deeper taking a closer look into precisely what banks with highest NPLs were doing with their litigation teams to increase loan recovery rate other than just issuing instructions. The recovery scene, as of last September, says a mere Tk 10,340 crore has been recovered out of a gigantic Tk 80,307 crore. It means a little over one-eighth has been recovered so far.
While BB has instructed these banks to take steps to contest writ petitions by defaulters at the High Court, it shows banks’ legal teams are flagging behind in this area. The banks facing capital shortfall will have to come up with new, workable loan recovery mechanisms and strengthen their legal teams; otherwise bad loans will continue to ballooning.
The lazy bankers with no banking knowledge came to the banking business for leading an expensive life style. Take help from the knowledgeable bankers to save the broken banking system. Just do not blame loan defaulters. Please try to be honest in the midst dishonesty everywhere and think of long term future of the country. Think of competence and not flatter.
However, we had for long anticipated that this would happen anytime sooner or later. Now that the capital shortfall has erupted at a bigger scale, we want to see how the regulator — Bangladesh Bank would tackle it. Rescheduling loans should not be the norm and it also played little role in recovering non-performing loans (NPL). Just last month the BB has asked commercial banks to set targets of loan recovery from the Top-20 defaulters for 2018 – once their respective boards have been constituted. Each bank has been asked by BB to submit its loan recovery plans and therefore submit quarterly progress reports on amounts of recovered loan on a quarterly basis. Unquestionably a good decision, but our question is precisely what steps the respective banks (with highest NPLs) have taken to strengthen the mechanisms involved for loan recovery?
In fact, the BB should have gone deeper taking a closer look into precisely what banks with highest NPLs were doing with their litigation teams to increase loan recovery rate other than just issuing instructions. The recovery scene, as of last September, says a mere Tk 10,340 crore has been recovered out of a gigantic Tk 80,307 crore. It means a little over one-eighth has been recovered so far.
While BB has instructed these banks to take steps to contest writ petitions by defaulters at the High Court, it shows banks’ legal teams are flagging behind in this area. The banks facing capital shortfall will have to come up with new, workable loan recovery mechanisms and strengthen their legal teams; otherwise bad loans will continue to ballooning.
The lazy bankers with no banking knowledge came to the banking business for leading an expensive life style. Take help from the knowledgeable bankers to save the broken banking system. Just do not blame loan defaulters. Please try to be honest in the midst dishonesty everywhere and think of long term future of the country. Think of competence and not flatter.
