Tk 65,321 cr bad debt write-off in 2022

Mahfuz Emran: In the bank sector in 2022, the default loans write off stands at Tk 65,321 crore. Which in 2021 was Tk 60,498 crores. According to that, the default loans write off increased by Tk 4,823 crores in one year. This information has come up in the latest report of Bangladesh Bank.
Those concerned say that the bank has deleted Tk 65 thousand crores from the existing loan book. Banks have been forced to write off these loans after failing in various efforts, including lawsuits, auctioning of depository assets and compromises. However, there are allegations of negligence and irregularities against the bankers in giving many loans.
Bangladesh Bank’s report also shows that from 2003 to 2022, Tk 20,828 crores of debt was recovered from the write off debt. As a result, the amount of loan repayment till December 2022 stands at Tk 44,493.
At this time, the defaulted loan is Tk 1 lakh 20 thousand 649 crore and the outstanding rescheduled loan is Tk 2 lakh 12 thousand 780 crore. All together till December 2022, the distressed loans in the bank sector were Tk 3 lakh 77 thousand 922 crores. Currently, that figure is likely to increase further.
Executive Director of Policy Research Institute of Bangladesh Ahsan H. Mansoor said that this amount of distressed loans is almost half of the current fiscal year’s budget. This picture shows that the banking sector is moving towards an unstable situation.
According to the report of Bangladesh Bank, government commercial banks have write offTk 16,449 crores, private commercial banks Tk 26,568 crores, foreign commercial banks Tk 1,125 crores and specialized banks have confiscated Tk 351 crores.
Due to the epidemic corona that hit the world last two years, Bangladesh Bank gave various concessions in debt collection. But experts are of the opinion that those concessions have not been useful. Banks have resorted to old strategies when defaulted loans are not reined in despite various concessions. Efforts are being made to reduce defaults by canceling loans. This long-standing strategy is called debt consolidation.
According to the rules of Bangladesh Bank, if the bank’s non-performing loans are not recovered for 3 years (which was earlier 5 years), they are kept in a separate ledger book from the main balance sheet of the bank. Prior to this, a case has to be filed in the 100% security deposit or provision and money lending court. In banking terms that is known as write-off. This is how banks have been foreclosing loans since 2003.
In this context, the former governor of Bangladesh Bank Saleh Uddin Ahmed said, this situation is due to not being careful while giving loans. Now the bank is not able to recover that money by lending under the pressure of the upper class. To save the banking sector now there is no option to take legal action against them. Otherwise, high risk assets such as defaults, reschedules and foreclosures will continue to rise.
The banking sector has to account for risky assets as a condition of a $4.7 billion loan from the International Monetary Fund (IMF). At one time, Bangladesh Bank published the number of risky or distressed loans in the banking sector in the annual financial stability report every June. The IMF has stipulated that it should resume. An IMF staff report in January said the Covid-19 financial assistance policy is set to expire in December 2022. Since the relaxation of these policies could lead to losses in the banking system, asset classification, particularly restructured debt, should accurately reflect current balance sheet risks. The amount of assets at risk should be properly disclosed.
According to international norms, the amount of risk assets is disclosed along with the defaulted loans in the banking sector giving a true picture of risky or distressed assets.
According to the report of Bangladesh Bank, there has been a slight deterioration in the quality of assets in the banking sector as a whole in 2022. Because the amount of defaulted loans has increased slightly. As of December 2022, the defaulted loan was 8.16 percent. Which in 2021 was 7.93 percent. Defaulted loans in shipbuilding and shipbreaking industries are 22.43 percent. It is the highest among other non-performing loans.
There are 11.75 percent non-performing loans in the leather and leather industry, 11.54 percent in the textile industry and 11.12 percent in the ready-made garment industry.
Former President of Bangladesh Economics Association. Mainul Islam said that Bangladesh Bank’s calculation of defaulted loans is not correct. Actual defaulted loans exceeded Tk 4 lakh crore. Which will not be less than 25 percent of the total loan. Although Bangladesh Bank is showing only a little more than 8 percent.