Allow banks to impose travel ban on defaulters

Top bankers have urged the central bank to allow commercial lenders to impose foreign travel bans on wilful defaulters and publish their names and photographs, as part of efforts to rein in the growing volume of defaulted loans.

They also proposed barring loan defaulters from contesting elections of business associations.

The proposals were submitted to the Bangladesh Bank (BB) by the Association of Bankers, Bangladesh (ABB) recently, in line with instructions of the regulator following a meeting on November 12 last year.

At present, imposing a travel ban requires court approval. The bankers have suggested enabling banks to enforce such restrictions swiftly without going through lengthy legal procedures.

ABB, a forum of chief executives of banks, prepared a package of legal, regulatory and institutional reforms aimed at reducing non-performing loans (NPLs) and speeding up the recovery of classified assets.

According to BB data, total disbursed loans stood at Tk 18.03 lakh crore at the end of the July -September quarter of last year. Of this, Tk 6.44 lakh crore had become defaulted, accounting for 35.73 percent of outstanding credit.

This was the highest bad loan ratio since 2000. A year earlier, defaulted loans made up 16.93 percent of total outstanding credit.

While calling for stricter action against wilful defaulters, ABB also recommended limited and time-bound relief for borrowers facing genuine distress due to illness, death or natural disasters, in line with international best practice.

To speed up recovery, the bankers proposed tax and duty exemptions on bank-auctioned assets, income tax incentives for buyers and the removal of court approval requirements for transferring auctioned properties.

They also sought stronger cooperation from land registry offices to ensure the swift transfer of mortgaged assets.

The association further suggested simplifying proceedings under the Money Loan Court Act. Its recommendations included limiting court adjournments, speeding up the enforcement of arrest warrants, restricting long-term instalment facilities and establishing dedicated loan recovery courts in districts with a high concentration of default cases.

To prevent new defaults, ABB proposed creating a central database of mortgaged land and valuation information under the BB. The system would allow lenders to verify collateral more efficiently and reduce risks at the lending stage.

The letter, signed by ABB Chairman and City Bank Managing Director Masrur Arefin, said the association hopes the central bank would move quickly to implement the proposals and help restore discipline and confidence in the banking sector.