BB outlines tough measures for wilful defaulters

The Bangladesh Bank yesterday introduced strict measures for wilful defaulters as the authorities look to restore people's confidence in the banking sector in the face of escalating defaulted loans.

At the end of 2023, defaulted loans accounted for 9 percent of all outstanding loans at Tk 145,633 crore, up 20.7 percent year-on-year. This is more than four times the cost of Dhaka metro rail or Padma bridge.

The stern measures, which come as part of BB's roadmap to bring down defaulted loans to less than 8 percent by June 2026, were articulated in a detailed guideline, which outlined the criteria for identifying wilful defaulters.

Banks will be fined from Tk 50 lakh to Tk 1 crore if they violate the central bank guideline on wilful defaulters. If the violations continue, the central bank will impose a fine of Tk 1 lakh per day.

A separate unit called 'wilful defaulters identification unit' will have to be formed by banks by April 9 and the bank management will have to carry out all related activities through the unit.

If a defaulter is identified as a wilful defaulter as per the Bank Company Act, the concerned borrower will get 14 working days to present their statement on the issue.

A wilful defaulter is one who does not repay their loan, advance, investment or any other financial benefit taken by themselves or their family members or institutions despite their ability to furnish the sum.

The borrowers will continue to be marked as wilful defaulters until the loans are recovered fully.

The list of wilful defaulters would be sent to the Bangladesh Securities and Exchange Commission and the Registrar of Joint Stock Companies and Firms to impose a ban on foreign travel and trade licence in line with the Bank Company Act.

It will also be sent to the registration authorities of vehicles, land, houses, flats and so on. Those authorities will take appropriate action under their existing laws and rules, it said.

The wilful defaulters will not be able to become bank directors for five years after they come out from the default list and they will not be able to get any national award.

Any interest waiver facility and loan rescheduling facility will not be eligible for the wilful defaulters, as per the BB guideline.

Banks and non-bank financial institutions will not be able to take over the defaulted loans of wilful defaulters.

While the guideline on wilful defaulters is presented nicely, there is still scope to become non-wilful defaulter from wilful defaulter, according to industry insiders.