Default loans will lead to a weakened economy; Wilful defaulters must be punished

We commend the finance minister for having the courage and the foresight to make the full list of the loan defaulters public. This will strengthen our constantly eroding culture of transparency and accountability.

From the way the Bangladesh Bank has been changing provisions of the bank loans, extending the repayment time and relaxing the procedure of repayment, one would conclude that protecting the defaulters’ interest is more important to our authorities than protecting the economy itself. However, it must be admitted that our state bank wouldn’t and couldn’t have done so without the direct involvement of the finance ministry. Every global and national institution worth its name have warned us against the menace of rising default loans and urged us to reign them in. Everybody appears to listen except the two bodies most directly concerned.

Let us repeat what we have said hundreds of times before. Loan defaulters should first be divided into two groups—the wilful defaulters and those whose loans became bad because of business and political circumstances beyond their control. All banking facilities within reason should be extended to the latter group and none to the former. In fact, the former group should be shown the sternest face of the law. For their action not only wasted scarce national resource but also put the whole economy at risk. The wilful defaulters are so by choice with the sole purpose of defrauding the government and the public and to syphon of funds from the banks. By allowing it for so long, the finance ministry and especially the Bangladesh Bank gave the worst possible signal that there could be—that loans do not need to be repaid in time. And if you are cleaver enough, never.

The role of bank directors as revealed in the finance minister’s statement must also be equally condemned. They seem to think of their directorship as Aladdin’s Lamp whose every rub should get them new loans without, literally, any limit. Here again the role of Bangladesh Bank comes into question. Why did it allow this to happen?

All said and done, the default loans are a failure of the regulatory bodies. Time has come for urgent corrective measures, including police and ACC action against the wilful ones.