We are perplexed as to the red-carpet treatment being given by Janata Bank to one if it’s more prominent defaulters, Root Group, which ranks 49 out of the top 300 defaulters with the bank. The group that is not very well-known, is a textile and fertiliser producer, has outstanding loans amounting to Tk 1,049 crores (group’s total outstanding loans is Tk 1,060 crore) and is being allowed to regularise this amount. And here is the catch. The bank is preparing to extend fresh import financing worth Tk 750 crore to the group. A few questions come to mind. First, the defaulting group represents 19.51 percent of all defaulting loans from Janata Bank. The bank’s financial state is precarious to say the least—default loans stand at Tk 21,410 crore, which is 44 percent of total outstanding loans.
The bank has breached the Bangladesh Bank’s (BB) single borrower exposure limit which is set at 15 percent and yet here we find Janata Bank decided to reschedule Root’s default loans by taking 3 percent down payment (Tk 30.8 crore). There is more. A report by BB found evidence of money laundering way back in 2013 and there is proof that Tk 373 crore was diverted and yet the bank kept financing the group. It brings us to the question why Janata Bank bypassed a High Court order and permitted Root to reschedule loans at three and not five percent. The Bangladesh Financial Intelligence is investigating the matter, since there is the question of money laundering. We have seen all this before. The big question here is that how will loan defaulters be discouraged if the regulator takes such a lenient approach to defaulters? Why bother with repayment when a company can get loans regularised with a paltry three to five percent deposit? With regularisation comes the new opportunity to take out fresh loans and the whole cycle begins again. Are we not, in fact, institutionalising the culture of loan default through these measures? The message being given out here is that it is alright to default on loans, because the policy is to go easy on them.