Photo: Collected
Two agricultural banks in the country, established to meet the substantial financial needs of farmers, find themselves submerged in a sea of defaulted loans. Even if the previously paid loan is in default, it cannot be recovered.
The Bangladesh Agricultural Bank (BKB) and the Rajshahi Agricultural Development Bank (RADB), both state-owned banks, have revealed that while they are able to collect money from small defaulters, they are struggling to collect from larger defaulters. Last year, the target for recovery from the top 20 defaulters for both banks was Tk 170 crore, but only Tk 11.05 crore, or 6.5 percent of the total target, was realised.
Every year, the central bank sets targets for collecting money from defaulters. However, the two banks have consistently failed to meet these targets for collecting money from larger defaulters, while exceeding targets for collecting from smaller defaulters. This information was obtained from the review report of the memorandum of understanding (MOU) signed by the two banks with the central bank.
According to reports submitted by the two banks, the Bangladesh Bank (BB) set a target of collecting Tk 120 crore from the top 20 defaulters of BKB last financial year. The bank only realised Tk 10.26 crore, which is 8.55 percent of the total target. At the end of June 2022, the top 20 defaulters had a debt of Tk 827 crore.
However, the bank is in a better position to collect money from other loan defaulters. Last financial year, the bank's target to recover money from other defaulters was Tk 405 crore. In that financial year, the bank collected Tk 501.19 crore, which is 123.75 percent more than the target. At the end of June 2022, the balance of loans to other defaulters was Tk 1798 crore.
On the other hand, the situation in collecting money from the top 20 defaulters is fragile. According to the report, the BB set a target of Tk 50 crore collection from the top 20 defaulters of RADB last financial year. The bank realised only Tk 0.79 crore of the target, which is 1.58 percent of the total target. At the end of June 2022, the outstanding debt to the top 20 defaulters was Tk 279 crore.
This bank also has a good recovery situation from small defaulters. Last financial year, the target of the bank to recover money from other defaulters was Tk 350 crore. The bank collected Tk 442.54 crore that financial year, which is 126.44 percent more than the target. At the end of June 2022, the outstanding debt to other defaulters was Tk 1151 crore.
Sector stakeholders say that the BB gives targets every year, but it's just for show. The top borrowers have been given loans in disregard of the rules. Adequate collateral was not kept against these loans. So even after filing a case, money is not being collected from these defaulters.
Meanwhile, the two banks have failed to collect money from loan cancellations or write-offs. According to the report, BKB had a target of Tk 19 crore from write-offs last financial year. The bank managed to collect only Tk 4.01 crore, which is only 21 percent of the total target. At the end of June 2022, the bank's write-off loan position was Tk 193 crore.
Meanwhile, RADB also failed to meet the target. The bank's collection target for the last financial year was Tk 16 crore. Only 6.17 crore, which is 39 percent of the total target, has been collected.
The two banks have also failed to reduce defaulted loans. In fact, defaulted loans have not decreased but increased. However, RADB's new defaulted loans did not increase. BKB was supposed to reduce its defaulted loans to Tk 1,969 crore last fiscal year. The bank could not reduce the defaulted loans. On the contrary, it has increased by Tk 562 crore. At the end of last June, the defaulted loan status of the bank stood at Tk 3,188 crore, which was Tk 2,625 crore at the end of June 2022. RADB's target was to bring down the non-performing loans from Tk 1,430 crore to Tk 173 crore in the last financial year. But the bank could not meet that target. At the end of the last financial year, the bank had a balance of Tk 1,430 crore.
When asked why the recovery of large loan defaults is less, RADB Managing Director Niranjan Chandra Debnath told The Daily Messenger, “I have only been in this position for 6 months. Significant progress has been made in recovering loans from large defaulters. The divisional commissioners of Rajshahi and Rangpur are board members of the bank. Additionally, we are seeking the cooperation of the DC and SP of each district.”
“Despite court orders against the big defaulters, the debt cannot be recovered. They file again, delaying realisation. However, you can see our significant progress in the next quarter," he added.
Messenger/Fameema
