Loan recovery frustrates regulatory authorities

Most banks recover less than 1pc of outstanding loans

Mahfuja Mukul:The banking sector of the country has posted down graded performances during the first eight months of current calendar year. Most banks neither been able to earn any significant amount of profit nor been able to recover outstanding loans. As a result, the sector has recorded 2021 as most non-performing year due to the Covid-19 pandemic.
Earlier, Shariah-based banks have performed much better than the conventional banks, especially in making profit and outstanding loan recovery but this year none of the Islamic banks have been able to earn remarkable profit nor been recovered laudable outstanding loans, told BB sources.
According to the sources of BB, 5 private banks could not even retrieve a single penny of their disbursed loans in the April-June period.
They are Community Bank, ICB Islami Bank, South Bangla Agriculture Bank, Mutual Trust Bank and Union Bank.
State-owned Agrani Bank also put up a poor show with only 0.11 percent recovery of regular loans, while IFIC Bank’s recovery was 0.3 percent.
During the three months, the overall recovery rate of regular loans was 17.7 percent, while the amount of loans disbursed during the time stood at around Tk19,793 crore, according to Bangladesh Bank data.
On the other hand, as of June, the amount of default loans that 24 scheduled banks could realise was less than 1 percent. These are:AB Bank, Bangladesh Commerce Bank, ICB Islami Bank, IFIC Bank, Midland Bank, Modhumoti Bank, NRB Commercial Bank, NRB Global Bank, One Bank, Padma Bank, Premier Bank, Southeast Bank, and Standard Bank witnessed less than 1 percent recovery of default loans.
The situation of foreign banks in retrieving default loans is even worse as Citibank NA, HSBC, and Woori Bank witnessed zero recovery.
Bank Alfalah could realise only 1 percent or Tk3 lakh of its default loans, while the recovery rate of Habib Bank was 0.3 percent.As of June, loans amounting to Tk11.40 lakh crore were disbursed, of which, Tk95,243 crore were defaulted.
In April-June, the amount recovered stood at Tk1,075 crore, meaning that the overall rate is 1.89 percent.
The Bangladesh Bank gave the loan moratorium facility to borrowers to cushion the Covid-19 fallout for the entire 2020. But borrowers will enjoy the repayment pause based on the bank-client relationship.
Banks can’t classify any loans if borrowers repay 25 percent of instalments by December this year, according to the central bank’s new circular.