Unveiling names of defaulters won’t solve banking sector woes, Experts say

Disclosing the names of defaulters will not be enough to arrest the rising default loans in the banking sector, said two experts today.

Their comments came after Finance Minister AHM Mustafa Kamal released a list of 300 defaulters at a session at parliament today.     

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The government placed a list of 100 defaulters in parliament last year and this time it disclosed the names of 300 defaulters, said Khondker Ibrahim Khaled, a former deputy governor of the central bank.

“But, exemplary action has yet to be taken against the defaulters whose names were disclosed last year,” he told The Daily Star.  

“The finance minister may reveal another list of defaulters next year. Simultaneously, he should place a report if any punitive measure is taken against the defaulters within the period,” he said.

He said the new list of 300 defaulters, who hold less than 50 percent of the total default loans, has not painted the actual situation in the banking sector.

“The finance minister has not revealed the name of the influential persons, who got stay order on their defaulter status from courts. A large amount of loans are now stuck with the courts,” he said.

The name of the borrowers enjoying the stay order should be published, Khaled said.

“Disclosing the list of defaulters will not bring any major impact to the high volume of non-performing loans,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

“There might be a psychological impact on the defaulters. But this will not help recover the default loans,” he said, adding that the parliament should give a clear direction on how to realise the default loans.

He said some persons in the list might become defaulters owing to suffering losses from operating business.

The method to recover default loans should not be the same for all types of defaulters as some borrowers became defaulters for genuine reasons while some are willful defaulters, said Mansur, also a former economist of the International Monetary Fund.

“Assets of the habitual defaulters should be confiscated. Even they have to be imprisoned. Rescheduling facility should be barred for them as the developed countries do not extend such scope,” he said.

The Bankruptcy Act should be amended so that the “genuine” defaulters can get out of the mess, according to experts. In the US, the courts offer restructuring facility to the “genuine defaulters” under similar laws.