Default loans surged to record Tk 1.56 lakh crore: BB

Staff Reporter :
The non-performing loans (NPLs) in the country’s banking sector reached a record of Tk 156,039 crore as of June this year thanks mainly to the lack of corporate governance in the sector.

Earlier in the January-March quarter of this year, the defaulted loans in the banking sector was amount to Tk1,31, 621 crore referring in the second quarter(April- June) defaulted loans rose by Tk 24,419 crore.

The total outstanding loans in the banking sector stood at Tk 1,542,655 crore, as of June 2023.

At the end of the sixth month of 2023, the NPLs stood at Tk 156,039 crore or 10.11 percent of the total disbursed loans, as per the latest data from the Bangladesh Bank.

Experts said, 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 in the country.

Meanwhile, a recently published World Bank (WB) report showed that Bangladesh occupying the second-highest position in South Asia in terms of a bad loan ratio.

The country is just behind Sri Lanka, whose non-performing loan (NPL) ratio is close to 12 percent, while Bangladesh’s is close to 10 percent.

Country’s NPL situation was almost stagnant from 2012 to 2015. From 2016, it began rising and this trend continued until 2019. From 2020, due to the halting nature of the pandemic, the finance ministry started loosening the definition of default loans.

This practice encouraged further eruption of NPLs. Any default loan was allowed to be a regular loan if the defaulter adjusted as low as five percent of the total liability.

This was imprudent and a clear signal of mass impunity for financial wrongdoers, triggering moral hazards among new borrowers.

Regarding the surge of NPL, eminent economist and academician professor Muinul Islam, said that the Bangladesh Bank’s calculation of defaulted loans is deemed inaccurate, currently standing at Tk 4 lakh crore.

A significant portion of Tk 2 lakh crore remains stuck in court cases, while Tk 55,000 crore has been written-off. In total, the defaulted amount accounts for Tk 4 lakh crore in these instances.

A specific interest group, exploiting political connections and influence, deliberately acquired loans from banks and intentionally defaulted on them, Prof Muinul Islam added.