Banks battle with rising defaulted loans
Staff Reporter :
Defaulted loans of all banks have increased by nearly Tk 11,000 crore in the first quarter of the calendar year 2023 due to lack of corporate governance in the banking sector and ongoing global economic crisis.
Analysis said banks in Bangladesh are now facing immense pressure due to rising Non-Performing Loans (NPLs).
The central bank’s latest quarterly data issued on Sunday showed that all banks’ NPLs increased by 9 per cent or Tk 10,924 crore, to Tk 131,621 crore in the quarter ended March 31, 2023, compared to Tk 120,656 crore in the previous quarter ended December 31, 2022 .
The ratio of NPLs in the banking sector stood at 8.80 per cent of the outstanding loans amounting to Tk 1,496,346 crore as of March this year.
The percentage of default loans was 8.16 per cent in December and 8.53 per cent in March last year.
At the end of March this year, the total amount of defaulted loans in State-owned Commercial Banks (SOCBs) stood at Tk 57,959 crore.
Likewise, the amount of default loans was Tk 65,889 crore for local private banks and for foreign banks it reached Tk 3,042 crore.
Till March, Non-Performing Loans in Specialized Banks (SDBs) stood at Tk 4,732 crore, as per data from the central bank.
Seeking anonymity an official of the central bank said that the amount of non-performing loans would have been much higher than the existing volume had the central bank not relaxed the loan classification policy.
As per the central bank rules, borrowers were allowed to avoid the default zone by giving only 15 per cent of their total installments of loans payable for last year, he informed.
Regarding the this issue, former governor of BB Dr. Salehuddin Ahmed said that a group of businesses is becoming defaulters willfully and the central bank has to be strict with such people.
Lack of good governance, some organized groups have taken more money as loans than their ability, which is a reason behind surge in defaulted loans, he added.
The Executive Director of the Policy Research Institute of Bangladesh, Ahsan H Mansur, said local banks have been sitting on a gigantic amount of defaulted loan and the clean-up exercise has been a daunting task for the sector.
He said public sector banks had been the worst-hit due to NPLs crisis as they accounted for a lion’s share of these loans.
Mansur feared that a large portion of the defaulted loans had been laundered abroad because they were taken under fictitious business entities, making recovery impossible. He also cited that rising defaulted loans also poses risk to the revival of Bangladesh economy which has been facing various challenges amid global economic crisis and high inflation.
