Default loans increased by 6.5 times in 15-year

Mahfuz Emran : The amount of bad loans in the banking sector has taken a terrible shape. In 2022, this loan was Tk 106,982 crores. In 2023, it stands at Tk 126,782 crores. In other words, the bad debt increased by Tk 19,800 crores in one year. This information has come up in the latest report of Bangladesh Bank.
Another indicator of the same report shows that seven public and private banks failed to maintain the desired safety reserve or provision during October-December last year. The deficit of these banks stands at Tk 24,189 crores, which in the same period of 2022, the deficit of eight banks was Tk 19,048 crores. The provision deficit has increased by Tk 5,141 crores in a span of one year.
According to the report of Bangladesh Bank, as of December 2023, the debt status in the banking sector stands at Tk 16 lakh 17 thousand 689 crores. Out of this default is Tk 1 lakh 45 thousand 633 crore or 9 percent of disbursed loans. When Awami League formed the government in 2009, the defaulted debt in the country was Tk 22 thousand 481 crore 41 lakh. Now it is about one and a half lakh crore. That is, defaulted loans have increased almost 6.5 times in 15 years.
The report also shows that banks that have been known for fraud at various times are at the top of defaulted loans. However, in various ways, some banks regularly show unpaid or benami loans. As a result, all banks in bad condition are not in this list.
National Bank of Pakistan had the highest default rate till December. 98.22 percent of the disbursed loans of the bank have defaulted. Besides, about 87 percent of ICB Islami Bank, 64 percent of Basic Bank, 52 percent of Bangladesh Commerce Bank, 46 percent of Padma Bank and 42 percent of BDBL are in default.
However, the calculation of defaulted loans by Bangladesh Bank is not true. Because, the actual defaulted loans are more. Many loans cannot be marked as defaulted due to litigation. Again, foreclosed loans are not defaulted.
In this context, the former president of Bangladesh economy Professor Dr. Moinul Islam told that due to the lawsuit, many loans cannot be shown as defaulters. Again, foreclosed loans are not defaulted. If these two loans are taken into consideration, the actual default amount will exceed Tk 4.5 lakh crore. He feels that as long as separate tribunals are not established for debtors, defaulted loans will not be reduced.
Meanwhile, the National Parliament has amended the Bank Company Act. As a result, the defaulters also have the opportunity to take loans. Earlier, if any company of a business group defaulted, they could not get loans from other companies. The new law has kept that opportunity.
Bangladesh Bank wants to bring down the non-performing loans of the banking sector below 8 percent by June 2026 in accordance with the conditions of the IMF. It has been announced to reduce it to below 5 percent in private banks and below 10 percent in government banks. However, this information will not be published by calculating in a relaxed manner as now. The concerned officials of Bangladesh Bank said that the current laxity in calculating defaulted loans will be removed soon and the calculation will be started in the light of the international method as before.
The former governor of Bangladesh Bank Salehuddin Ahmed told that Bangladesh Bank has not taken any strict action so far. A few initiatives have been mentioned in very recent times. Looks like they won’t work either. Where circles of political influence and power are created, nothing can be done. In such a context, a culture of non-lending has been created, which is very bad – because of the wrong policies of Bangladesh Bank. Lately, if the notification issued to the bank managers can be implemented professionally, the defaulted loans will be reduced to some extent. Otherwise, it will not be possible to reduce defaulted loans.
It is known that there is a lack of good governance in the banking sector – even though economists have been saying this for a long time, Bangladesh Bank has not taken it into account. The issue of extreme liquidity crisis in some banks has recently come to the fore due to various reasons including lack of confidence. Bangladesh Bank has taken the initiative to reform the banking sector due to the shortage of money in the midst of the dollar crisis. In this case, a roadmap to reduce defaults was revealed in various ways, including consolidation of a few banks that were in a very bad condition, relaxation of loan cancellation policies and strengthening of collection. Based on the four indicators, various strictures will be imposed from the year 2025, including ban on loans and deposits. At the same time various initiatives will be taken to restore good governance including prevention of benami and fake loans. In addition, instead of three years, if there is a default of two years in the next two years, the opportunity of forfeiture will be given. Through this it is possible to reduce defaulted loans of Tk 43,300 crores in the banking sector.
Former Chief Economist of World Bank’s Bangladesh Residential Mission Zahid Hossain told that there is no visible and effective initiative to stop defaulted loans, everything is artificial and showmanship. The root of the problem is not addressed. Due to this the situation has not improved but is continuously deteriorating. In recent times the road map given for the banking sector has nothing meaningful except one.