Benefitting loan defaulters must be stopped as the state-run banks shouldn’t suffer anymore
Mismanagement, corruption, nepotism and subsequent bad debts allegedly keep plaguing the banking sector of Bangladesh, especially the four state-run banks. The bad loans at the banks — Sonali, Janata, Agrani and Rupali banks — surged to Tk 42,161 crore in 2022 from Tk 32,618 crore a year ago. As a result, their collective profits declined more than 24 per cent to Tk 703 crore last year, according to the banks’ financial statements.
A news report published in a national daily on Tuesday said the four state banks out of six registered 29 per cent year-on-year spike in bad loans in 2022 as the central bank’s relaxed classification rules introduced in the wake of the Covid-19 outbreak ended and their inefficient lending persisted. As part of the relaxed loan classification, the repayment period for defaulted loans was increased to eight years from two years. The defaulters can take fresh loans as well.
Experts said the defaulters have been getting policy support in various ways, including the increase in the number of installments, the extension of the repayment period and the waiver of interest. So, many borrowers don’t bother about repaying loans to the state-run banks. The borrowers, according to experts, enjoyed the moratorium on loan classification in 2020 and 2021 and the facility continued in 2022, albeit in a less relaxed form. The largest lender of the country, Sonali Bank’s bad loans rose 2.58 per cent year-on-year to Tk 11,859 crore in 2022. The situation was also dire at Agrani Bank, Janata Bank and Rupali Bank.
According to experts, the defaulters believe that the government will not allow the state-run banks to collapse and will unveil bailout packages, if necessary. So many of them feel less interest in paying loans and become willfully defaulters. Meanwhile, the IMF team, during the visit to Bangladesh, on May 7 (Sunday) raised concerns once again over risks to the Bangladesh economy such as inflation, growth and foreign reserves. Reserves are likely to fall to $29.86 billion, the lowest in seven years, after import bill payments for two months next week.
It’s high time the central bank and relevant authorities ramped up their activities and updated their policies to bring down bad debts and curb the defaulted loan ratio. In a situation where Bangladesh is struggling with depleting forex reserves and a potential liquidity crisis, there is no other way but to deal with the situation with strong hand. The entire nation cannot be allowed to suffer to fill up the coffers of certain vested groups.
