July 18, 2024, 2:31 pm

FT Online

2019-06-20 21:55:27 BdST

IMF seeks clarification of 'wilful defaulters'

The International Monetary Fund (IMF) has expressed interest to know about the definition of wilful loan defaulters, which will be used for identifying them legally.

The visiting IMF mission's interest was shown at a meeting held at the Bangladesh Bank (BB) headquarters in Dhaka on Wednesday with BB Banking Reforms Advisor SK Sur Chowdhury in the chair.

The BB officials told the meeting the central bank has initially set four criteria to indentify the wilful loan defaulters who might face stern action.

For example, if a borrower who has the ability to repay the loan, but avoids repayment will be treated as willful defaulter.

Similarly, if the borrower sells the mortgaged property without consent of the banks, he or she will deemed wilful loan defaulter.

A high-powered committee, headed by Ahmed Jamal, deputy governor of the BB, is now working on the issue, the central bankers said.

"The committee is now working on the issue," a BB senior official told the FE after the meeting without elaborating.

The number of independent directors of private commercial banks (PCBs) also came up for discussion.

A five-member IMF Article IV Consultation Mission, led by Daisaku Kihara, Division Chief, South Asia 2 Division, Asia and Pacific Department, of the global lender also met with two deputy governors of the central bank to discuss different issues, including the latest situation of non-performing loans in the banking sector.

The mission is expected to meet finance minister A H M Mustafa Kamal and senior officials of the ministry of finance (MoF) and the central bank during the visit, which that will conclude on June 27.

Senior bankers, however, urged the authorities concerned to issue a guideline defining habitual or wilful loan defaulter immediately.

Currently, there is no guideline to detect wilful or habitual loan defaulter legally, according to bankers.

"We'll welcome a circular defining of wilfull or habitual loan defaulter to avoid subjectivity," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), 

Talking to the FE, M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, said: "We want a guideline to help fight against wilful loan defaulters legally."

The government, in its budget unveiled last week, has announced a six-point reform programme aimed at streamlining the country's banking sector.

The government's latest announcement came against the backdrop of soaring soured loans in the country's banking sector, despite close monitoring by the central bank.

The volume of defaulted loans climbed by more than 18 per cent to Tk 1,108.73 billion in the first quarter (Q1) of the year from Tk 939.11 billion in the earlier quarter, according to figures available with the central bank.

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