Court expresses resentment with the central bank’s decision to offer such facilities repeatedly
The Supreme Court, on condition, has stayed for two months a High Court order that had extended its earlier ruling to freeze a Bangladesh Bank circular offering lenient terms to loan defaulters.
The latest order means the circular — which allows the loan defaulters to reschedule classified loans with 2% down payment and 9% interest over 10 years — will remain active for the time being.
But, the court said, anyone opting for the facility will not be eligible to take new loan from another bank in two months, according to Advocate Manzill Murshid, who represented the petition against the circular.
The four-member Appellate Division bench, led by Chief Justice Syed Mahmud Hossain, yesterday also selected the High Court bench of Justice JBM Hassan and Md Khairul Alam to dispose the issued rule.
The apex court gave the orders yesterday, apart from some observations, while hearing an appeal filed by the Finance Ministry seeking reversal of the High Court’s previous freeze order on the circular. Attorney General Mahbubey Alam represented the state.
The court also expressed its resentment over Bangladesh Bank's decision for offering such facilities to loan defaulters repeatedly.
Saying these types of decisions were taken to give privileges to special classes, it also questioned to why the money (loan) was not given back despite defaulters enjoying such privileges continuously.
After the hearing, Manzill said, through the petition, they tried to prevent the loan defaulters from using the central bank latest decision to take the rest of the money from the banks.
“I think we have been mostly successful because of today’s order. The 2% down payment will bring some of the money back, and they (defaulters) won’t be able to take new loans. Through this, we hope, it will be possible to protect the people’s money,” he said.
In the circular issued on May 16, the Bangladesh Bank sought to allow defaulters to regularize bad loans by paying a 2% down payment only, instead of 10% to 50%, within 10 years.
On May 21, the High Court issued a status quo till June 24 on the central bank’s May 16 circular following a writ filed by the Human Rights and Peace for Bangladesh.
On June 24, the High Court extended the freeze order by two months, till August 24.
The Appellate Division yesterday also stressed ensuring appointment of honest officials in the banks, and asked the attorney general what kind of action the government was taking against major loan defaulters.
“It should be looked into whether any special quarter is getting such facilities. The government is running the country, but the country belongs to the people.”
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The court also expressed concern over farmers and small borrowers being tried religiously for defaulting on small loans. “But what legal action is taken against major loan defaulters. We are worried; there should not be any more Basic bank or Farmers Bank.”
Previously, after the central bank issued the circular, experts had come down heavily on the policy, saying offering such facilities will increase the number of willful defaulter and discourage good borrowers from repaying loans.
However, yesterday, they decided to refrain from making comments on the issue, saying it was a sub judice matter.
Dr Iftekharuzzaman, executive director of Transparency International Bangladesh, denied commenting specifically on the issue, but added: "The state is providing impunity and protection to loan defaulters.
"... the burden (of the loan) ultimately falls upon the shoulders of the people.”
He further said: "If exemplary accountability is established instead of providing protection, then the space for loans to default will be reduced. But such measures are not taken by the authorities concerned."
Dhaka Tribune yesterday also reached former Bangladesh Bank deputy governor Khondkar Ibrahim Khaled and former caretaker government adviser AB Mirza Azizul Islam for comments, but they declined to comment on the sub judice matter.
On May 18, World Bank’s Lead Economist for Dhaka office Dr Zahid Hossain had said that all defaulters would take this opportunity provided by the central bank.
He admitted that this would reduce the amount of defaulted loan of the banking sector but it said nothing as to what would be the arrangements for those who would be defaulters again.
He had said that the law against the defaulters needed to be tightened and its implementation was necessary.