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Dhaka Tribune

‘Default loans soar for political influence’

Update : 26 Nov 2014, 06:43 PM

Finance Minister AMA Muhith yesterday said political influence was the key factor in increasing loan defaulters in Bangladesh.

The minister made the comment at a meeting with Asian Development Bank Vice-President (operation) Wencai Zhang.

Muhith said: “During the early period of Awami League regime encouragement from political parties added to loan defaulters in the country.”

The finance minister, however, claimed that the government has become successful in controlling the default loan situation and managing to decrease the number of defaulters significantly.

In reply to a question, he said it is not true all political persons are involved in commercial bank’s default loans and financial irregularities. 

The government has no relation with influential persons related to private commercial banks, claimed Muhith.

Regarding recent default loans, the minister said rescheduling time-frame in addition to hard and fast rules is a major reason to increase default loan of the state-owned commercial banks.

The clients of the state-run banks usually import commodities like fuel, fertiliser and foods but the loans taken under the letters of credit remain unpaid for a long time and thus the borrowers turn defaulters.

He also focused the lack of good management responsible for increasing default loans for BASIC and Krishi Bank.

There is no new directive for Bangladesh Bank as the government has already given it responsibility for keeping vigilance on the state-owned and private commercial banks, Muhith continued.

On November 22, the finance minister asked Banking Division Secretary M Aslam Alam to let him know about the default loan situation in the country’s banking sector.

In his letter written to the secretary, he wrote: “The rise in default loans caused uproar in the press. I want to know what the real situation is and how we are operating this.”

According to news reports, it seemed that there was a competition among commercials banks in disbursing loans without adequate scrutiny of the borrowers’ financial status, which eventually led to failure in loan recovery.

Besides, the commercial banks do not disclose regular default loan amounts as they fear being identified as “problem banks” by the central bank, said a BB report on default loans. 

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