Recovery of a Classified Loan – A Real Life Story

Recovery of a Classified Loan – A Real Life Story

 Shaiful Hossain, Banker and Author

"Classified loan" and "defaulters" - these terms have become very familiar in the country. Once people used to feel ashamed of becoming defaulters but now-a-days the situation is quite different. It seems defaulters are no longer in the category of bad people and defalcation of loan is very normally accepted in society. Investment in business, either from own source or from bank loan, is always a risky undertaking. If the loan taken from the bank is not properly invested and return on investment is not satisfactory, it becomes very difficult on the part of a businessman to repay the loan, along with accrued interest, in time. Defaulters are of different categories. There are some businessmen, who know it well that they are defaulters, come to the bank to get loan. They are socially well connected. These people are wilful and sometimes habitual defaulters. But there are some businessmen who can't repay the loan of the bank because of business failure or some other unavoidable reasons. Sometimes if situation demands, banks come forward to help the clients with more fund to overcome the backdrop. Examples of wilful defaulters may be Hallmark, Bismillah etc. who snatched away the fund in a cool and planned manner in cooperation with the so-called banking professionals of the respective banks and the influential outsiders. We should not forget that this fund is nothing but the money of the small depositors who deposited their hard-earned money with the banks in utmost trust. According to Bangladesh Bank (BB) statistics up to March this year, the size of classified loan in the banking sector has increased to Tk. 481.72 billion from Tk. 405.83 billion at the end of December last year. Case-to-case analysis will show the lion’s share of the classified loans belongs to the wilful and intentional defaulters. Situational or unintentional defaulters can come out of the problem if they have intense desire, mental strength, proper business acumen, banking support and family support. A REAL-LIFE STORY: Here is a story from my own experience: While working in a private commercial bank as Head of Branch located at Motijheel C/A, I encountered a fallen businessman. He was hesitant to enter my chamber. As a relationship manager I welcomed him with warm hospitality and asked him what I could do for him. He sat down at ease but he had a strange and mad look in his eyes. I encouraged him to describe his situation. He took a loan of Tk 200 million (20.00 crore) against his import and trading business. The security coverage was huge having a market value of around Tk 350 million (35.00 crore). He could not run the business as he incurred a huge loss in the business. He confessed that after getting the loan he replaced his F Premieo by a latest model Mitsubishi Pajero and spent a lot of money in visiting new countries. He also bought some lowlands afterwards. He realized that diversion of fund from his business accelerated the pace of negative growth of his business and subsequent huge loss along with other genuine factors including political unrest, uneven competition in the market, theft by his Accountant and Manager, fraudulent activity of his long-term business associates, family hazards etc. I listened to him with great attention. He thanked me for my patient hearing and then talked about his personal matters. His family members, close friends and relatives disdained him. He became a pauper and could barely run his family. His loan got classified long back, bank served legal notice and lastly at our fervent and frequent request he visited the bank. The businessman became very emotional at one stage of our one-to-one discussion. I requested him to get composed. I told him that I would give him a homework and would try my best to be with him in the bad days if he followed my advice. He responded in the affirmative. I gave him two pieces of paper and asked him to go to a quiet place and write down the details of his assets in the current market prize in one piece of paper and liabilities, with up-to-date interest, in another piece of paper. Then I suggested him to call a family meeting with his wife, only son aged 18 and only daughter aged 20. I requested him to place and elaborate every aspect of his current situation: business downfall, bank loan, legal action the bank was going to initiate, mental agony, broken health, his sleepless nights, diabetes, high blood pressure, the future of the family in his absence, negligence from his friends and relatives. He should disclose the details of his assets and liabilities before his family members and to seek solution from their end who, in his absence, would inherit everything - assets and liabilities, happiness and sorrows. He stood up with a mighty grin in his face and told me that it was a good idea to take the advice from his family members who were always out of his attention. I asked him to meet me after the meeting would be over. After a few days he came to meet me and I took time to recognize him. He was well shaved, neatly dressed with shiny tie in his neck and beautiful shoes on his feet. With a happy face he sat in front of me and thanked me first for giving him the idea of sharing everything with his family members and taking advice from them. "I misunderstood my wife, I misunderstood my son and daughter. They were very happy as I shared everything with them," he said. "They have requested me to sell my landed property to pay off my liabilities. The main thing is that I have come to know and believe that they love me, not the property and they all want to grow with me and want me to be with them healthy and alive," he continued. He said in conclusion: "I slept well last night and now I have come here to give you a decision on behalf of my family that we will sell off our property mortgaged with your bank gradually and pay off the loan. I would make a request to waive some accrued interest." I assured him of waiving some interest in consultation with my management. He was now a different man with much confidence as he was not feeling lonely anymore; the family and bank were with him. Gradually the man came out of the default list of the Bangladesh Bank (BB) and he started his business again. He sold out some property but he saved himself and family bondage got stronger. The bank was able to recover the classified fund. The last sentences he told me can be a lesson for us all. He said, "I committed mistake in diverting bank's fund, spending a lot of money for buying car and land and the greatest mistake was that I thought it was my own money and would never return the money to the bank."

The writer is a banker and columnist

 He can be reached at letusthinkbig@gmailcom (It’s a published Post Editorial in Financial Express)

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