Banking sector hostage to loan defaulters
Central bank statistics have clarified that State-owned Commercial Banks (SCBs) have been suffering the brunt of irresponsible loan defaulters as a total of 200 companies are holding 60 percent of total default loans in Sonali Bank (Tk 10,559 crore), Agrani Bank (Tk 3,895 crore), Janata Bank (Tk 3,527 crore) and Rupali Bank (Tk 1,746 crore) respectively. A report in this newspaper on Friday confirmed with the central bank that the total amount of default loans as of June 2014 stands over 19 thousand crores and the amount of the overdue loans payable by those companies is Tk 11,831.52 crore. Till last December, the SCBs default loan amount was around Tk 16 thousand crores.
This poses a severe problem for the SCBs in conducting their day to day business and becomes a burden due to the huge amount of overdue loans payable by the defaulting companies. Officials of Bangladesh Bank (BB) have confirmed that the banks reportedly sanctioned fresh loans to the said companies under political consideration and ‘pressure’ despite the companies’ poor credit records. According to the Bank Company Act 1991, the outstanding amount of loan to a single individual, counterparty, company or a group of persons cannot exceed 35 percent of the capital of a bank.
Assessing the circumstances, the rising default, bad and non-performing loans in the SCBs are leading them to a severe capital shortfall and affecting lending activities. This cannot continue as this has already adversely affected the banking situation of the SCBs and they have also veered away from holding the irresponsible companies accountable for their inability to pay loans. Influential companies must not be allowed to run a mock and conduct business irresponsibly, harming the nation’s banking capital and making way for further corruption.
There is no second opinion that the banking sector, particularly the state of affairs in the SCBs, has gone wrong, almost to a point of no return. And a common excuse ¾ that of the politically appointed board of directors ¾ is responsible for all the ills that relate to the banking sector. We would not also contradict to this common perception of facts. But what we would like to point out is the role of the professional bankers. In fact, these bankers are equally, if not squarely, responsible for all these mess in the banks for not being professional in assessing the financial viabilities of those loan cases. There are evidences that those bankers rather indulged in corruption to make money in the process of sanctioning or renewing or rescheduling those loans, now in default. Bangladesh Bank should investigate into the matter.
This poses a severe problem for the SCBs in conducting their day to day business and becomes a burden due to the huge amount of overdue loans payable by the defaulting companies. Officials of Bangladesh Bank (BB) have confirmed that the banks reportedly sanctioned fresh loans to the said companies under political consideration and ‘pressure’ despite the companies’ poor credit records. According to the Bank Company Act 1991, the outstanding amount of loan to a single individual, counterparty, company or a group of persons cannot exceed 35 percent of the capital of a bank.
Assessing the circumstances, the rising default, bad and non-performing loans in the SCBs are leading them to a severe capital shortfall and affecting lending activities. This cannot continue as this has already adversely affected the banking situation of the SCBs and they have also veered away from holding the irresponsible companies accountable for their inability to pay loans. Influential companies must not be allowed to run a mock and conduct business irresponsibly, harming the nation’s banking capital and making way for further corruption.
There is no second opinion that the banking sector, particularly the state of affairs in the SCBs, has gone wrong, almost to a point of no return. And a common excuse ¾ that of the politically appointed board of directors ¾ is responsible for all the ills that relate to the banking sector. We would not also contradict to this common perception of facts. But what we would like to point out is the role of the professional bankers. In fact, these bankers are equally, if not squarely, responsible for all these mess in the banks for not being professional in assessing the financial viabilities of those loan cases. There are evidences that those bankers rather indulged in corruption to make money in the process of sanctioning or renewing or rescheduling those loans, now in default. Bangladesh Bank should investigate into the matter.
