The finance ministry is going to take action against ‘delinquent loan defaulters’ and also ‘dishonest bank officials’ for their negligence in recovering the bad loans in a bid to put an end to the ‘growing default culture’.

Finance minister AMA Muhit has directed his ministry and the Bangladesh Bank’s officials to get prepared to execute the action plans, which are imperative to curb corruption in the banking sector.

According to officials of the finance ministry, Muhith will hatch the much-needed plans after discussing five specific issues, including the ones mentioned above, with the officials concerned in a crucial meeting this month.

The meeting has been convened against the backdrop of the recent debate on bad loans inside and outside the parliament after the finance minister disclosed the huge amount of bad loans. Some Tk 15,451 crore is lying as bad loans with 2,196 loan defaulters as of 31 March, 2009. These defaulters include only those who defaulted on loans of Tk 1 crore and above.

Muhith, who was also the finance minister in army dictator HM Ershad’s government, told reporters that he did not like loan defaulters at all. He claimed that he had identified defaulters in the early 1980s and taken action against them. ‘This time more stringent action will be taken,’ he promised.

Other points of discussion at the meeting will be the identification of delinquent and willful defaulters, and updating of the list of defaulters regularly. The finance minister will also focus on devising an ‘exit policy’ for the sick industries which have no chance of being revived, added the finance ministry’s officials.

Banking sector experts said the successive governments had tried to recover the bad loans but their half-hearted efforts, instead of producing the desired results, had pushed up the amount of bad loans over the years. According to the Transparency International Bangladesh, large borrowers willfully defaulted on loan repayment, being emboldened by their close links with the corrupt civil-military bureaucracy.

The defaulters used their connections to extract concessions in the form of interest waivers and repeated rescheduling. Some defaulters are alleged to have used the defaulted funds to start private banks and insurance companies. This gave them a further opportunity for insider lending and for diverting yet more funds to various pet ventures.

The TIB pointed out that successive governments had made half-hearted attempts to tackle corruption in the banking sector and the recommendations of the various committees had never received due priority. In some cases, the final report was not even published, it added.

-New Age