Ever-Rising Defaulted Loans: When Will This Toxic Culture End?
IT goes without saying that defaulted loans are a primary cause of the banking sector’s woes.
The alarming trend of a “culture of default”-which began during the previous Awami League regime-has now accelerated, deepening concerns. The number of loan defaulters is skyrocketing.
The number of loan defaulters stood at 2.2 million in March of last year; by March of this year, that figure had risen to 4.6 million.
In other words, the number of defaulters more than doubled within a year.
A report published by Bangladesh Bank on Thursday reveals that large borrowers and large-scale industries account for the highest number of defaults.
In March of last year, the rate of non-performing loans in the banking sector stood at 24.6 percent; by December, it had risen to 31.2 percent. By March of this year, the figure climbed further to 32.7 percent.
This trend in non-performing loans serves as a warning signal for the country’s overall economy.
Reports indicate that willful defaulters and large corporate houses are responsible for the surge in non-performing loans.
In fact, a culture of loan default has become an inevitable symptom of the banking sector.
During the tenure of the previous fascist government, billions of taka was looted under the guise of loans through political lobbying, bribery, and syndicates.
At the Probashi Kallyan Bank alone, non-performing loans account for 61 percent of the total loan portfolio.
The old syndicates remain active. In fact, the fascist government has destroyed the banking sector.
Reviving the country’s economy from these ruins is a formidable task.
Above all, unless the culture of loan defaults is eliminated, no optimism will yield results.
Needless to say, given the current state of the banking sector, extensive reforms are required.
Significant changes must be introduced in the processes of loan disbursement and recovery. Social resistance against loan defaulters has also become necessary.
As an immediate measure, the roadmap has introduced a new exit policy to discourage the long-standing practice of bullet payment-based loan rescheduling, which allows defaulting borrowers to regularise or reschedule their loans by making a small one-time upfront payment .
It can be said that implementing measures to socially boycott defaulters and deprive them of civic privileges would yield significant results.
The Ministry of Finance and Bangladesh Bank must delve deeply into the issue and devise a system to safeguard the economy from the adverse effects of loan defaults.
We firmly believe that this toxic culture of ever-rising defaulted loans will only end when genuine political will enforces strict credit discipline, removes political patronage, and fixes regulatory loopholes.
