The central bank has asked the Association of Bankers Bangladesh (ABB) and the Bangladesh International Arbitration Centre (BIAC) to draft a guideline to recover non-performing loans and amend relevant laws.
The directive came at a meeting at Bangladesh Bank on April 12, said the BIAC in a statement yesterday.
The tripartite meeting took place to find ways to strengthen the alternative dispute resolution (ADR) system in order to settle the large number of pending cases involving the banking sector.
Chairing the meeting, Abu Hena Mohd Razee Hassan, deputy governor of the BB, called for strengthening the ADR process to settle the disputes related to NPL as it is becoming a matter requiring immediate attention.
The BB is willing to provide relevant support to expedite the ADR process and make it more effective, he said.
The central bank has already encouraged all scheduled banks through an advisory letter in April 2016 to try ADR at the BIAC.
Hassan requested the ABB and the BIAC to jointly put forward a draft guideline, which will be considered by the BB for circulation, said the statement.
Muhammad A (Rumee) Ali, chief executive officer of the BIAC, said the Artha Rin Adalat Ain 2003, the Code of Civil Procedure 1908, and the Arbitration Act 2001 have limitations.
“Not every defaulter is a willful defaulter and the reforms should give them an opportunity to settle any dispute through ADR,” he said, adding that courts should take pre-litigation mediation and arbitration into cognisance.
He urged banks to empower their own representatives attending the mediation hearings so that they can take decisions. “Often mediation effort is not effective due to limitations imposed on the attending representative.”
The former deputy governor appealed to the ABB to intensify efforts in referring cases to the ADR in order to arrive at an amicable and expeditious settlement.
Syed Mahbubur Rahman, chairman of the ABB, said the ADR works better in disputes involving small amounts of money. The volume of cases in the SME and retail sectors is substantially high and the propensity to default willfully in this group is higher, he said.
Sohail RK Hussain, vice-chairman of the ABB, said legal amendments to the Artha Rin Adalat Ain should include making mediation mandatory for retail and small enterprise sector loans, and arbitration mandatory for loans in the medium enterprise sector.
This should be included in all loan contracts of up to a threshold of Tk 25 crore, he said, adding that the time limit should be 60 days and facilitated through institutions such as the BIAC, according to the statement.