Banking sector’s distressed assets hit Tk9.5 lakh cr: PRI

Business Report :

Distressed assets in Bangladesh’s banking sector may have climbed to Tk9.5 lakh crore, combining rescheduled, restructured, and defaulted loans, according to new estimates by the Policy Research Institute (PRI).

“Non-performing loans currently stand at Tk6.4 lakh crore (almost 36 percent), but total distressed assets may have reached around Tk9.5 lakh crore, indicating a low asset recovery potential,” said Dr Ashikur Rahman, principal economist at PRI, while presenting the keynote paper at a programme titled “Monthly Macroeconomic Insights (MMI)” at the PRI office in Banani, Dhaka, Thursday.

He warned that persistently high NPLs are creating severe risks of a credit crunch and weakening the country’s investment pipeline.

“At least 16 banks have become incapable of issuing new loans, leading to lower investment, rising unemployment, and slower development ultimately dragging down GDP growth,” he said.
Dr Rahman outlined four major consequences of failing to manage high NPLs: high interest rates, high inflation, low growth, and low investment.

‘Many taking loans just to repay other loans’
Speaking at the event, Anwar-Ul-Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries (BCI), said lending to the private sector has fallen sharply, pushing the economy into a dangerous zone.

“The economy is bleeding. Is the government listening? Unfortunately, they don’t care about the business community,” he added.

Private-sector credit growth fell below 7 percent between June and August the lowest in 22 years.
Parvez said the declining credit flow, combined with the rising burden of non-performing loans, has put the economy under serious threat.

Government data show NPLs stood at Tk6.44 lakh crore as of last September. But Parvez believes the real figure will be even higher and blamed government policies for worsening the situation.
Previously, borrowers had six months to reschedule defaulted loans, but from next March the time limit will be reduced to three months a move Parvez believes will trigger a further rise in NPLs.
Businesses blame policy failures
Rejecting the narrative that businesses alone are responsible for rising loan defaults, Parvez pointed to repeated energy price hikes without improved supply.

“Energy prices have been repeatedly increased with promises of better supply. That did not happen. As a result, production in gas-based industries has fallen to 40 percent. Is this the private sector’s fault?” he asked.

He added that the National Board of Revenue’s (NBR) new target of Tk55,000 crore in additional revenue will further strain businesses.

“We fear more pressure is coming again. It will come in the name of Tax Deducted at Source (TDS), increasing the cost of production,” he said.

“Why such a rush?” he asked, criticising what he described as poorly executed NBR reforms that have “made the agency’s situation worse than before.”

The programme was moderated by PRI Chairman Dr Zaidi Sattar and attended by business leaders, economists, and other participants, who voiced deep concern over the rising volume of distressed assets and its long-term implications for financial stability.