Wilful loan defaulters face ban on travel, home and car purchase

The financial market regulator orders banks to form units within Apr 9 to identify such loan defaulters

Bangladesh Bank has defined wilful loan defaulters who will face a ban on overseas travel,  purchase of homes, flats and cars, and starting new companies.

Such people or organisations will have to wait for five years after repayment of loan to become directors of banks. The post will be declared vacant if a director is identified as a wilful defaulter.

In a notice on Tuesday, the central bank ordered the banks to form units within Apr 9 to identify such loan defaulters.

An official two ranks below the managing director will head the unit.

People who use non-existent firms, forged documents and fraudulent acts to get loans, and those using loans on a purpose different from the one stated to secure the credit will also be considered wilful defaulters.

The central bank said it will be possible to keep order in disbursing loans and increase the capability of the banking sectors, along with cutting classified loans if wilful defaulters are identified and face action.

Wilful loan defaulters are defined by the central bank as people, organisations or companies who do not pack back their loans with interests despite having the ability to do so.

Besides loans, funds taken in advance, investments or other financial facilities taken from a bank or financial institution for their own, family members, or organisations and companies in which they have interests will also be parts of the definition of wilful defaulters.

The banks will have to notify the wilful defaulters before identifying them. After a defaulter is identified, the unit will decide if they defaulted wilfully. In case of logical reasons, defaulters can be given time to repay.

The wilful defaulters will be given 14 days after they are identified.

To identify those from large industries with more Tk 750 million loans, the units will need the executive committee or board’s approval. The threshold is Tk 300 million for medium industries and Tk 100 million for other sectors.

The customers can appeal the decision in the Bangladesh Bank. The central bank’s words on the matter will be final.

Wilful defaulters will not get trade licences and be ineligible to claim any state award.

The banks have been barred from rescheduling such loans, which cannot be sold or taken over.

The defaulters will be identified as wilful defaulters until full repayment of loan.

Banks will face fines between Tk 5 million and 10 million if they do not follow the orders given in the notice on wilful loan defaulters.

The units on such defaulters will have to report to the central bank’s Credit Information Bureau every three months.