Bank customers who willfully default in repaying loans advanced to them must be treated as criminals and dealt with severely by the law courts, entrepreneur and Chief Executive of CIDAN Investments, Dr Raziel Obeng-Okon is demanding of the judiciary.
Dr Obeng-Okon who is also a Senior lecturer in Public Accounting at the Ghana Institute of Public and Management Administration (GIMPA) said “until we criminalize willful loan defaulters, our non-performing assets will continue to have damning consequences on our economy.”
“Willful defaulters must be treated as criminals and dealt with severely. This is done in other jurisdictions and it has helped to significantly reduce their non-performing assets,” the businessman demanded.
Slow wheels of justice disincentive to business
Dr Obeng-Okon called for the creation of special desks at the courts for loan recoveries alone with an intention to ensure that no case lasts more than six months.
The time and resources it takes to secure judgment at the courts and the difficulties inherent in executing those judgments for the realization of funds from defaulters present a major hurdle for businesses.
“Some cases take up to 5 years in the courts due to several adjournments in the courts and this is a disincentive to go to court. Some willful loan defaulters even have the guts to dare recovery managers of financial institutions to go to court because the delays in the courts favour them. It is not surprising therefore to see managers of some financial institutions behaving like “macho-men” and dealing ruthlessly with willful defaulters,” Dr Obeng-Okon pointed out.
The fast-track courts were set up to help expedite court proceedings and to help businesses deal with court issues expeditiously but the time of execution is still not acceptable to businesses.
Strong regulation needed
Currently all the acts, laws and operating rules for financial institutions are geared towards protecting the depositor or client. What about willful loan defaulters who have succeeded in crushing some banks? We need a strong regulation on willful defaulters to salvage not only the depositors but also loan clients.
For example, the Reserve Bank of India (RBI) has a Grievance Redress Committee which gives hearing to loan defaulters before they are declared as willful defaulters or criminals for prosecution.
Criminal action against willful defaulters in India falls under sections 403 and 415 of the Indian Penal Code (IPC). The Indian Companies Act, 2013 was amended to include a provision on willful default.
The Serious Fraud Investigation Office has also been institutionalized under this Act and is empowered to investigate cases of willful default and this could lead to imprisonment up to 10 years.
Trade Associations must protect members
Dr Obeng-Okon said Trade associations within the financial services sector must protect their members from willful defaulters by pushing for the right regulations to their regulators.
He gave the example, in September 2015, in which the All India Bank Employees Association staged a demonstration in India to put pressure on their central bank to put in extra efforts to recover the debts taken by corporate institutions and pushed for the defaulters to be declared as criminals.
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