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Politicians to blame for patronising loan defaulters

Speakers at a debate yesterday blamed the politicians for establishing the loan default culture in the country. They said the politicians take donations from the defaulters in exchange for arranging loans to them.

They said the changes in the definition of loan defaulters have actually reflected the influences of defaulters on the politicians.

They were speaking at the policy briefs on "Financial Sector Reform" of CPD Task Force Report on "Election 2001: National Policy Forum" in the CIRDAP auditorium in the city. Renowned economist Prof. Wahiduddin Mhamud chaired the session.

BASIC Bank Managing Director Alauddin Majid said anyone initiating moves against big defaulters was victimised.

"I strongly urge the civil society to back and support anyone taking moves against loan defaulters," the Alauddin Majid said.

Uttara Bank Managing Director Anisuzzaman said there was nothing wrong with the policies but the problem was the deviating from those. "And such deviations take place due to pressure from the powerbrokers.

Identifying two reasons for bad loans -- bribery and political considerations he said bank directors know well how and why the loans are approved.

Sonali Bank Managing Director SA Chowdhury said the banking sector has witnessed some positive signs as the default rate has come down to 34 per cent from an alarming 43 per cent.

He also called for better salary structure for the staff in banks for the improvement in the sector.

Editor of Bengali economic daily the Arthaniti said businessmen who give donations to political parties become defaulters. He said such defaulters are allowed to get huge loans against small collaterals on political considerations.

He said that the lawmakers who get elected after spending crores of taka always look for ways to be on the board of different financial institutions to siphon off funds.

Workers Party leader Rashed Khan Menon said politicians are patronising defaulters, as they need finance from them.

Regarding criticism of trade union, Menon said the concept of trade union is not bad, but it has become a big problem as the trade bodies are allowed to operate under political banners.

Managing Director of Pubali Bank Khondoker Ibrahim Khaled said any reform in the financial sector would also require reform in our culture. Khaled said since 1990s lot of reform programmes took place but did not yield satisfactory result.

He said no one wants a moratorium on CBA activities in the banks, but all we want is to reform the banking sector.

He also called for bringing changes in the service regulation for human resource development.

Cabinet Secretary and former Finance Secretary Dr Akbar Ali Khan said there is an improvement in bad loan recovery as the default rate comes down to 22 to 24 per cent.

He said everyone should be mentally prepared to accept the fact that a large portion of the default loans will remain unrealised.

He said most of the reform projects were donor-driven and if donors are asked for the reasons of less success they will come up with hundreds of reasons.

Akbar Ali said that for a US$175 million World Bank loan Bangladesh had to comply with as many as 65 conditions but the reform programmes did not yield result. He said that a study of the review committee on the World Bank observed that the project failed due to failure in the project design.

He said that the nationalised commercial banks will have to be privatised but it should be done gradually through unbundling.

Former BNP MP Amir Khosru Mahmud Chowdhury suggested in bringing changes in loan approving authority saying the banking businesses should be left with professionals and not the Board of Directors.

He said the current practice of loan approving authority lies with the bank owners who are not bankers but are owners of the banks.

He said such privileges also allow bank owners to swap funds between themselves, adding that even "smugglers are now on the board of banks".

Khosru also called for deregulation of interest which is very high due to curse of bad debt. "Government is also borrowing through different saving instruments and is setting up a high benchmark which will not be feasible for the private sector."

He said government should stop borrowing for which a huge amount of budget has to be earmarked to service debts.

Khosru suggested the development of stock and bond markets to reduce dependency on the banking sector as a source of finance.

Former BNP MP Major (Rtd) Akhteruzzaman, Merchantile Bank Managing Director, Press Advisor to the BNP Chairperson Riazuddin Ahmed also spoke on the occasion.