Tk 4 lakh crore default loans stuck in lawsuits

More than Tk 4 lakh crore in defaulted loans remain locked in over 2.22 lakh cases in money-loan courts, putting further strain on the already fragile banking sector and dragging on the wider economy.

Bangladesh Bank data show that as of June, 222,341 cases involving Tk 407,435 crore were pending across the courts.

Recently, a growing number of banks have filed cases in money-loan courts against major loan defaulters, including S Alam Group, Beximco Group, and Nassa Group.

Over just the last three months, the number of lawsuits rose by 2,708, while the amount tied up in litigation surged by Tk 86,674 crore, the data show.

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At the end of March, pending cases stood at 219,633 with Tk 320,761 crore under dispute, according to figures compiled by the central bank's Law Department.

Despite the surge in lawsuits, central bank officials say the strategy has yielded limited success as case disposal rates remain far lower than the pace at which new cases are being filed.

Between April and June, courts disposed of 11,944 cases, enabling banks to recover Tk 2,910 crore. During the same period, lenders filed 14,652 new cases involving Tk 96,904 crore.

In the January-March quarter of this year, banks disposed of 10,064 cases and recovered Tk 1,833 crore.

Bankers and industry insiders say many of the disputed loans involve irregularities or fraud, and that repeated waivers and rescheduling schemes have failed to bring defaulters back to repayment. Although banks are legally required to file cases to pursue recovery, progress remains slow due to systemic bottlenecks.

The number of money-loan courts is insufficient, they said, and delays are compounded by shortages of judges and by banks not providing lawyers with timely documentation, including collateral papers.

The consequences are mounting. A central bank report warned that the vast sums trapped in litigation are inflicting heavy losses on lenders and weighing on the overall economy.

Md Omar Faruk Khan, managing director of Islami Bank Bangladesh, recently said the bank would adopt a tougher stance against major defaulters, including S Alam Group, noting that its own stock of bad loans has approached Tk 100,000 crore.

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The bank has already filed several cases in this regard.

To accelerate recoveries, the Bangladesh Bank has instructed lenders to act under Section 12(3) of the Money Loan Court Act 2003, including issuing auction notices and seeking expedited hearings to vacate High Court stay orders.

Banks have also been advised to file civil miscellaneous petitions with the Appellate Division's Chamber Judge to lift such stays and clear the way for resolution.