Outstanding bank loans increased by 48.72pc in 5 years

Rafiqul Islam Azad: The volume of overdue loans has been constantly increasing in the banking sector. At the end of June this year, the amount of overdue loans has increased to Tk 223,327 crores. The amount was Tk 150,156 crores in June 2018. That is, overdue loans have increased by around Tk 73,000 crores or 48.72 percent in the five years, according to Bangladesh Bank sources.

Bank officials identified two reasons—the Corona pandemic and Russia-Ukraine war–behind increasing the volume of overdue loans in the last five years.

They observed that the emergence of corona pandemic brought a delicate business situation for the businessmen and entrepreneurs. In such an economic situation during corona, many businessmen did not have the ability to pay the loan installments. Besides, Bangladesh Bank also brought relaxation in loan repayment.

Besides, when the corona situation improved, the Ukraine-Russia war started that also contributed to reducing loan repayments. So the realization of overdue loans was less and the amount of overdue loans increased, said the bankers.

Apart from this, they said, the debt collection is also decreasing due to the ongoing economic crisis in the country.

A Bangladesh Bank report shows that the total amount of overdue loans in the banking sector was Tk 150,156 crores at the end of June 2018. The amount stood at Tk 159,817 crores at the end of June 2019.  The amount of overdue loans increased to Tk 175,247 crores at the end of June 2020 while the overdue loan status was Tk 177,164 crores at the end of June 2021. The overdue debt reached Tk 196,624 crores by the end of June 2022.

At the end of June this year, the overdue debt increased by Tk 26,703 crore and stood at Tk 223,327 crore which is the highest amount of increase in overdue loans in the last five years in the banking sector.

Sources said, the overdue loans have increased the most in the last five years in the industrial and commercial sectors.

According to the central bank report, the overdue loan status in the industrial sector was Tk 55,257 crores at the end of June 2018 while the overdue loan status stands at Tk 89,038 crores in the same period of 2023. That is, the overdue loans in this sector have increased by Tk 33,781 crores or 61.13 percent in the span of five years. At present, the debt status of the industrial sector stands at Tk 578,454 crores.

On the other hand, overdue loans in the business sector have increased by 29 percent in the last five years. As of June 2018, the overdue loan status in the business sector was Tk 56,425 crore while the amount increased to Tk 72,840 crores at the same time in 2023. In this sector, at the end of June, the debt status stood at Tk 489,346 crores.

Besides, the overdue loans increased by Tk 6,273 crores in agriculture sector while Tk 3,634 crores in construction sector and Tk 929 crores in consumer sector. On the other hand, the overdue loans in the communication sector decreased by Tk 359 crores.

Sources said, the total debt in the banking sector stood at Tk 1446,073 crores at the end of last June this year while the amount was Tk 847,015 crore at the end of June 2018. That is, the debt has increased by Tk 599,058 crores or 70.72 percent in the span of five years.

On the other hand, the amount of loans recovered by the banks was Tk 208,890 crores in the second quarter of this year (April-June). The banks were able to collect Tk 191,605 crores in the same quarter last year. That is, the collection has increased by Tk 17,285 crores.

A high official of a private bank said the country’s dollar crisis, pressure on reserves, and unstable currency exchange rates are causing a major crisis in the economy.

The global economic situation is slowing down. The people of the country are grinding inflation. People are running out of money. There is a problem with exports. Crisis has also arisen in the SME sector. As a result, loan repayments have decreased, he observed.

The official further said banks are also not able to open import letters of credit (LC) as per demand. So, the traders are not able to do business properly and thus the debt collection is decreasing, he added.

Talking to Daily Industry, Dr Zahid Hussain, former lead economist of World Bank’s Dhaka office, put emphasis on the need to identify as to who are the loan defaulters and the reasons behind their failures.

He said, most of the loan defaulters belong corporate houses and over 50 per cent of loans provided by state-run banks remain overdue.

However, the amount of overdue of loans in the agriculture, SME (Small and Medium-sized Enterprises) and microcredit sectors is very marginal, he observed.

Dr Zahid further said, it is the governance issue to deal with the matter and if the regulators do not work properly and efficiently, the amount of outstanding loans will increase further.