That non-performing loans would pile up in banks was predictable

Under the present state of the country’s banking governance, it is only natural that the state-owned commercial banks would fail to keep non-performing loans within the limit that they had agreed upon under the annual performance agreements for the financial year 2022-23.

Even from the private banks, politically influential people are taking away public money under the very watch of the central bank.

When the non-performing loans pile up, they reduce a bank’s capacity to lend money to productive sectors and affect economic activities.

According to a recent national daily report, state-owned banks such as Sonali, Janata, Agrani, Rupali, Bangladesh Small Industries and Commerce Bank Limited and Bangladesh Development Bank Limited fail to recover repay installments for six months from the borrowers and thus these banks have been categorised as banks with non-performing loans.

Reportedly, the NPL of Sonali Bank in FY23 stood at 11,978 crore against Tk 11,500 crore in the APA signed with the Financial Institutions Division.

Similarly, Janata Bank’s NPL stood at Tk 13,950 crore against its agreed limit of Tk 12,000 crore.

While Agrani Bank’s NPL stood at Tk 14,810 crore against the agreed amount of Tk 9,500 crore, for Rupali Bank the NPL stood at Tk 9,925 crore against the agreed amount of Tk 5,500 crore.

Since the introduction of the APA in 2015-16, it has not been possible for the authorities of the banks to keep NPL within the target limit which, experts believe, was due to Bangladesh Bank’s weak monitoring over the state-owned banks.

The truth is the BB’s monitoring power has been made weak deliberately.

The policy of loan rescheduling is largely responsible for the NPL in the scum-hit banking sector of Bangladesh.

This policy, rather in a weird way, has created willful loan defaulters who evade the loan repayment.

Moreover, contrary to expectation, this policy has not brought any benefits for the banks as well.

At the time when the loan rescheduling policy was introduced the move was largely criticised for it was meant to give the country’s politically powerful businessmen, the loan defaulters, special treatment.