Default loans, a big problem for economy

The recovery of default loans is still weak in Bangladesh despite offering relaxed repayment policies for three consecutive years to 2022 as delinquent borrowers are not paying back funds on time. Recovery increased a bit between January and September of 2022, the trend is quite unsatisfactory given the recent escalation of bad loans in the banking sector.
Between January and September, banks retrieved Tk 7,357 crore, which accounted for 5.47 per cent of the outstanding default loans of Tk 134,396 crore, data from Bangladesh Bank showed. Lenders recovered Tk 4,195 crore in the first nine months of 2021, or 4.14 per cent of the total classified loans. The recovery is much lower than pre-pandemic levels, which hampered banks’ smooth operation as their lending capacity has been squeezed. Banks recouped Tk 5,802 crore from their cumulative non-performing loans in 2020 in contrast to Tk 15,466 crore the year before.
Although the central bank followed relaxed loan classification policies in the three years to 2022, the recovery did not pick up. Some Shariah-based banks, including Islami Bank Bangladesh Ltd, have recently faced a wide range of scams, which will increase default loans in the days to come. In May 2019, the central bank permitted defaulters to have their classified loans regularised by making a down payment of 2 per cent instead of 10-50 per cent. Besides, they were given a repayment period of 10 years with a grace period of one year.
The central bank allowed borrowers to avoid the default zone in 2020 even if they did not pay any instalment of their loans throughout the year. The relaxed facility has disrupted the loan recovery programme. The political ticket to vested quarters embezzling the banks by relaxing rules will not bring any fruit for the country. Compromise of national interest for allowing undue favour is the destructive step, and by this our economy reached this nadir.