Time expired loan stood at Tk 257,392cr

Total default loan now Tk 4,39,687 cr

Zarif Mahmud: According to the data of Bangladesh Bank, the amount of time expired loans at the end of March this year stood at Tk 2 lakh 57 thousand 392 crores. If not regularized through repayment or rescheduling, this loan will soon be in the default account.
It is worth mentioning that a loan is considered overdue when the installment payments become irregular. Such loans are later added to the defaulter’s account.
The amount of overdue loans like defaulted loans in the country’s banking sector is also increasing at an abnormal rate. According to a review of the data of the central bank, the amount of overdue loans in the bank sector in March 2022 was Tk 1 lakh 88 thousand 972 crores. At the same time, the defaulted loans were Tk 1 lakh 13 thousand 440 crores. That is, two years ago the amount of defaulted and expired loans was Tk 3 lakh 2 thousand 412 crores. In March 2023, the amount of such loans increased to Tk 3 lakh 50 thousand 285 crores.
And in March 2024, defaulted and overdue loans exceeded Tk 4 lakh 39 thousand 687 crores. Of this, Tk 1 lakh 82 thousand 295 crores of defaulted loans. The remaining Tk 2 lakh 57 thousand 392 crore loans were overdue. In a span of just two years, the amount of defaulted and overdue loans has increased by Tk 1 lakh 37 thousand 275 crore or about 46 percent.
Banks are constantly resorting to rescheduling to prevent overdue loans from defaulting. In 2022 alone, a record Tk 63,720 crores of debt was rescheduled. Rescheduling in 2023 and extending the loan amount is more. Defaulted, rescheduled and restructured debt is considered ‘stressed’ or ‘distressed’ by the International Monetary Fund (IMF). At the end of last year, the rescheduled loan balance was Tk 3 lakh crore. Again, the banks have written off loans worth about Tk 68 thousand crore as they can’t be recovered in the normal process. In all, more than one-third of the country’s banking sector loans are now in the face of uncertainty. At the end of last March, the disbursed loan status of the country’s banks was Tk 16 lakh 40 thousand 855 crores.
Those concerned say that ‘expiration’ is the first step to default. If not sustained with remedies like rescheduling, these unpaid loans will quickly go into default. None of the initiatives being talked about by the central bank to control or reduce defaulted loans will work. In the future, the wound of defaulted loans will be deeper. This will put the banking sector in a more fragile situation.
Shahjalal Islami Bank Managing Director Mosleh Uddin Ahmed told, “Many businessmen of the country are now not paying the bank loans despite their ability.” Because of this, defaulted loans and overdue loans are increasing. Failure of credit analysis or credit management alone is responsible for defaulting loans in Bangladesh. Rather, there are many reasons for this, including economy and socio-economic situation, weakness of legal framework, lack of good governance, political culture. Businessmen say that their business expenses have increased in all areas including electricity, gas, water, VAT, taxes. Because of this they are not able to make profit.
However, on the condition of anonymity, the top executives of several banks said, “The spread of bribery and corruption in the country has increased to an alarming level.” As a result of this, defaults and overdue loans are increasing in the banking sector. No action is being taken against those who are smuggling the country’s money abroad. But the businessmen who are trying to do business honestly are being harassed in various ways. The central bank itself is taking anti-normative decisions under the pressure of the influential.
According to Bangladesh Bank data, the industrial sector has created the largest number of overdue loans in the country’s banks. At the end of last March, the amount of overdue loans in the industrial sector was Tk 1 lakh 6 thousand 242 crores. Trade and commerce has the second highest overdue debt of Tk 77,277 crore. Tk 18,198 crores of agriculture sector, Tk 15,604 crores of construction sector, Tk 5,763 crores of consumer loans are now expired. Among these defaulted loans, Tk 89,670 crores of government commercial and specialized banks. Loans of Tk 1 lakh 19 thousand 914 crores of private banks (except Islamic style banks) are now overdue. And Islamic banks have overdue loans of Tk 39,354 crores.
On the condition of anonymity, a responsible official of Bangladesh Bank told, “The country’s top five businessmen or industrial groups now have debts of about Tk 2 lakh crore. And if the benami loans of these groups are taken into account, the amount will be more than Tk 4 lakh crore. Most of these loans are now in default by international standards. But the loans are shown regularly in different ways. Similarly, the loans of private bank managers and influential businessmen are regularly shown to be defaultable. Expiration is not even showing in many cases. In this way, the country’s banking sector is being pushed into a more fragile situation by hiding information. Despite the sincerity of most of the officials of the central bank, irregularities and corruption can’t be prevented.
Bangladesh Bank liberalized the loan rescheduling policy in the last few years to show less defaulted loans. Earlier, one-time or down payment of up to 30 percent had to be submitted in case of rescheduling of defaulted loans. But this rate was reduced to 2 percent in 2019 to be flexible towards defaulters. However, there are allegations that influential customers of the bank are rescheduling defaulted loans without paying any down payment. Banks are regularly showing non-performing loans despite extending credit limits in favor of customers.
On the other hand, Bangladesh Bank has left the power of loan rescheduling in the hands of the respective banks. But earlier the banks used to pass the related proposal in their board and send it to the central bank for approval. The central bank would finalize the decision after scrutiny. But in July 2022, Bangladesh Bank issued a notification leaving that power in the hands of banks. After the notification is issued, the banks get the opportunity to reschedule the loan at their discretion. Concerned people see this ‘generosity’ of the central bank as the main reason for the jump in the rescheduling of defaulted loans.
Former Managing Director of Bank Asia Arfan Alibelieves that to reduce defaulted loans, we have to get out of the culture of rescheduling. He told, “Overdue or overdue loans are on the way to default.” Banks are offering rescheduling facility to show such loans regularly. In this, a class of customers continue to do business without repaying the loan. This is having an adverse effect on good traders. They are facing losses even after doing business in accordance with all laws and regulations.
Arfan Ali said, “My personal experience is that the businessmen who took loans from banks and used them for different purposes, smuggled them abroad, their loans are defaulting or expiring.” The more opportunities this class of businessmen get, the more damage will be done to the country’s economy and business environment. The debt repayment culture will return when the opportunity for debt rescheduling closes. The country’s banking sector will also get an opportunity to adapt itself to international best practices in debt repayment.
The top executive of a private bank of the second generation of the country said that we have a debt of about Tk 200 crore with a customer. When he asked the businessman for money, he said, “If I spend Tk 1-2 crores in court, all judgments will be in my favor.” Then why go to refund your money.
The former governor of Bangladesh BankSalehuddin Ahmed thinks that the effect of the collapse of good governance has become visible in all cases. He told, “The good governance of the country’s banking sector has collapsed long ago. People’s money has been looted in the name of loans with the connivance of the bank’s board of directors and management authorities. Due to this, despite easing the rescheduling policy, it is not possible to control defaulted loans in the banking sector. Hidden defaulted loans are much more than visible defaulted loans in banks of the country. Attempting to show regularity by rescheduling the same loan multiple times. That loan is again overdue or defaulted. To improve the situation, the entire banking sector, including the central bank, needs to be reformed.