Bank Loan Recovery
Bank loan recovery is a major part of banking operations at present time. Loan is given by a financial institution to a client with anticipations that the pay back conditions and conditions will be met by the counter party. But, credit becomes infrequent when the borrower is not able to pay back the financing within the specified interval. A non-performing loan is one which continues to be late for such an interval or more as described by the country’s regulatory body excepting some unique situations. Non-performing loan mainly consist of three categories of loan- sub-standard, uncertain and bad loss, all of which are measured on the basis of uniform requirements recommended by Bangladesh Bank.
Non-Legal Actions for Loan Recovery: Improvement of Efficiency of Non-Legal Measures
Since restoration through lawsuit is very costly, difficult and a awkward process, it is always much better settle the situations peacefully instead of starting litigation process. Therefore lenders should follow some non-legal measures to convince the borrowers as well as to put stress on them to reach at an friendly settlement. Conceptually, agreement of bad loan by discussing with the client before processing fit on rough outside judge agreement procedure even after getting lawsuit is a better approach to ensure restoration of loan. All the efforts or measures taken by financial institution to recover non-performing loan other than agreement through the judgment of a legal judge may be termed as non-legal measures for loan restoration. Included in this are debts for value exchange, debt restructuring company constructing, entertaining ‘win-win’ attention based discussion, motivating restoration employees through purpose key performance signs, detecting problems in initial phase, loan closing, conviction and/or developing stress through relatives, guarantors, work affiliates, employing exterior restoration agents, etc. Various potential non-legal measures for restoration of bad loan are Communication, Persuasion, Motivating Credit score Collection Staff, Recovery Campaign, Alternative Argument Quality (ADR), Appointment of Recovery Agent, Loan Restructuring, Corporate Reorientation of the Customer’s Business, Preparation and Flow of Record of Defaulters, Waiver of Interest, Rescheduling With/ Without Interest Waiving. Below are the steps or procedures of Non-Legal measures of loan recovery:
- Establishing fulfilling banker-customer relationship
- Creating attention for appropriate repayment
- Making and finalization of loan sanctioning and payment procedure in existence of all related parties
- Constant persuasion
- Strengthening beginning aware program in credit operation
- Understanding the actual reasons for default
- Personal as well as group check out to debtors and guarantor’s workplace & residence
- Creating stress through family members members& relatives
- Creating stress through significant regional individuals e.g. trade organizations, employer
- Co-opting affiliates from municipal community in ADR meeting
- Motivating restoration staff
- Recovery campaign
- Debt restructuring
- Corporate restructuring
- Disclosing listing of defaulters in Local Newspaper/Union parishad
- Arranging conference, symposium, against standard loan/ defaulters
Recovery of Write-off Loan
- Continuous persuasion
- Personal check out of concerned formal to company as well as property of the borrower
- Incentives for recovery
- Social stress through friends, close relatives, professional organization, company, local representatives
- Interest waiver as per suggestions of branch
- Yearly strategy for recovery
- External restoration agent
Steps Taken after a Loan becomes bad status
-Sending message and Follow up over phone or Spoken and written demand repayment
-1st reminder letter then 2nd Indication correspondence through SMS and letter
– Visit by department (personal/group) and Meeting with the clients
-Understanding the reason of irregularity
-Warning about lawsuit by next 15 days
-Letters to guarantor
-Legal observe by financial institution lawyer
-Final reminder through SMS, call and letter
-Legal notice
-Planning for legal proceedings
-Letter to different financial institutions and association
-Debt Restructuring/Rescheduling if believed appropriate
Legal Measures
The scale of buildup of standard loan, among other things, relies upon an the current legal measures for loan restoration, A strong and effective legal program boosts the potential for restoration of bad loan. Regulating reactions or changes in our financial industry took certain shape as regards to the cash self-discipline mainly in 90’s through the enactment of Cash Loan Court Act. Several legal measures along with the Cash Loan Court Act are in place that allows financial institutions to go for lawsuit against the late client. Several changes in Cash Loan Court Act have also been made at different with regards to lenders’ options that dominates in the financial industry of Bangladesh is certainly extensive one. Traditionally, the problem can be found rather with the administration of rules in appropriate manner.
It is generally indicated out by they that our judiciary program is complicated, and influx of the fit registered in a legal judge is also accountable for the buildup of unsettled difficult. Inadequate legal capacity with regards to variety of most judges with regards to situations in various legal courts, Taking legal activities to get better loan is costly, time-consuming and unsightly, these are the most severe ways to get better loan and that’s why should be used as the final option. The legal program allows defaulters to delay lenders’ options procedure consistently.
