Introduction
Loan default continues to be a significant concern for financial stability and governance in Bangladesh. A loan defaulter is generally defined as any individual, organisation, or company that fails to repay a loan or its interest within the required time after it becomes overdue, in accordance with the applicable laws, regulations, or directions issued by Bangladesh Bank. The total volume of defaulted loans in the banking sector rose to approximately BDT 5.45 trillion by the end of last year, as the finance minister stated while addressing Parliament.
Role of the Credit Information Bureau
The Credit Information Bureau (CIB) functions as a specialized bureau of Bangladesh Bank with the aim of reducing defaulted loans in the financial system. The bureau has undertaken various initiatives to improve Bangladesh’s position in the “Depth of Credit Information Index,” which forms part of the “Getting Credit” indicator in the World Bank’s Doing Business Report.
The CIB regularly updates borrowers’ credit information based on data submitted by banks and non-bank financial institutions (NBFIs), particularly during interim monthly reporting periods. It also corrects borrower-related information when banks or NBFIs request necessary amendments. In addition, the bureau provides the Election Commission with information on the loan default status of candidates participating in national and local elections upon request.
Statutory Disqualification Principles
Under article 12(1)(l) of the Representation of the People Order 1972, a person is disqualified from being elected as a Member of Parliament if they are a loan defaulter of a bank, excluding small agricultural loans, at the time of submitting the nomination paper.[1]
Similarly, section 26(2)(h) of the Local Government (Union Parishad) Act 2009 disqualifies any person from contesting or holding the office of Union Parishad Chairman or Member if, at the time of submitting nomination papers, they have any overdue and unpaid loan from a bank or financial institution.[2]
The same disqualification principle applies consistently across other local government laws in Bangladesh. No person shall be qualified to be elected as, or to remain in office, if they are loan defaulters of any bank or financial institution.
- Municipality and City Corporation: Mayors and Councillors are disqualified under section 19(2)(i) of the Local Government (Municipality) Act 2009 and section 9(2)(k) of the Local Government (City Corporation) Act 2009.
- Upazila Parishad: Chairmen and Vice-Chairmen are covered under section 8(2)(j) of the Upazila Parishad Act 1998.
- Zila Parishad: Chairmen, Members, and Women Members fall under section 6(2)(i) of the Zila Parishad Act 2000.
Together, these provisions establish a uniform legal standard that disqualifies loan defaulters from participating in or continuing in elected local government positions at all levels.
Judicial Precedent
The Appellate Division in Md Abul Kashem v Mahmudul Hasan @ Major General Mahmudul Hasan (Rtd) and Others held that bank loan defaulters are disqualified from contesting parliamentary elections.[3]
In this case, objections were raised at the initial stage of the 9th Parliament election for the Tangail-5 Constituency. The Deputy Commissioner of Tangail, acting as the Returning Officer, received information alleging the disqualification of Md Abul Kashem on two grounds: default in repayment of bank loans and non-payment of telephone bills.
Despite these objections, the Returning Officer accepted the nomination paper. The election was subsequently held on 29 December 2008. Md Abul Kashem was declared elected as the returned candidate through a gazette notification dated 1 January 2009.
Following the publication of the election results, Mahmudul Hasan submitted representations on 11 January 2009 and again on 28 January 2009 to the Chief Election Commissioner, seeking appropriate action against Md Abul Kashem. No effective steps were taken in response.
Consequently, Mahmudul Hasan filed an election petition before the High Court Division. Upon hearing the matter, the High Court Division allowed the election petition by judgment and order dated 15 December 2009.
Aggrieved by the judgment and order, Md Abul Kashem filed a Civil Petition for Leave to Appeal before the Appellate Division, and leave was granted on 18 August 2010. Upon hearing both parties, the Appellate Division dismissed the appeal by judgment and order dated 14 February 2012.
Md Abul Kashem subsequently filed a review petition before the Appellate Division, which was also dismissed on 5 June 2012. As a result, Mahmudul Hasan was recognised as the duly elected Member of Parliament on 8 August 2012.
Conclusion
Bangladesh Bank periodically allows a special loan rescheduling facility for defaulters. Rescheduling refers to the extension or addition of time to a borrower’s existing loan tenure, resulting in a revision of the instalment amount and repayment period. If loan defaulters continue to exploit such benefits, it leads to severe negative consequences, particularly concerning the integrity of national elections.
