Home Bank & Finance Default loans of 42 banks increased
Bank & Finance - October 9, 2023

Default loans of 42 banks increased

Bangladesh Bank report

Syed Nasir Hossain: Defaulted loans of the banking sector have increased abnormally. Bangladesh Bank has not been successful in reducing defaulted loans despite various concessions. In the last three months (April-June), out of 61 banks in the country, 42 banks have increased their defaulted loans. In three months, defaulted loans of 42 banks increased by Tk 24,419 crores. The central bank officials said that the increase in defaulted loans of so many banks has never happened before.
The International Monetary Fund (IMF) and the country’s economists are expressing concern over the increase in non-performing loans.
Officials of the central bank said that since the middle of last year, business has been under a lot of pressure due to various reasons. Again, some banks could not reschedule the loan. Some banks have defaulted again after rescheduling their loans. Therefore, the overall defaulted loans of the banking sector have increased.
According to the data of Bangladesh Bank, at the end of last June, the amount of defaulted loans in the banking sector stood at Tk 156,040 crores, which is 10.11 percent of the total loans. Although at the end of March, defaulted loans were Tk 131,621 crores, which is 8.80 percent of the total loans. And the top 10 banks have Tk 101,315 crores of total defaulted loans of the banking sector.
Non-performing loans in five government banks have increased: At the end of last June, the non-performing loans of six state-owned banks stood at Tk 74,454 crores or 25.01 percent, which was Tk 57,959 crores at the end of March. In other words, the defaulted loans of these banks increased by Tk 16,495 crores in three months.
Analysis of the data shows that in the last three months, defaulted loans have increased in five of the six state-owned banks. Janata Bank has the largest increase in defaulted loans. At the end of last March, the defaulted loan of the bank was Tk 14,887 crores or 17.46 percent. In June, Tk 13,655 crores increased to Tk 28,542 crores or 32.64 percent. After that, in three months, Agrani Bank’s defaulted loans increased from Tk 1,552 crore to Tk 16,495 crore or 23.51 percent. In addition, in three months, Basic Bank’s Tk 550 crore has increased to Tk 8,025 crore or 62.66 percent. The default rate of the rest is less than 20 percent.
Defaults have increased in 29 private banks: Last June, defaulted loans of 43 private banks stood at Tk 73,635 crores, which is 6.46 percent of the total loans. At the end of March, the amount of defaulted loans of these banks was Tk 65,889 crores or 5.96 percent. In other words, bad loans of private banks increased by Tk 7,746 crores in three months.
According to Bangladesh Bank’s data analysis, default loans have increased in 29 out of 43 private banks in the last three months. Out of this, defaults in One Bank increased by Tk 584 crores to Tk 2,831 crores or 13.09 percent, in IFIC by Tk 472 crores to Tk 2,767 crores or 7.21 percent, in Trust Bank by Tk 344 crores to Tk 2,371 crores or 7.69 percent. Tk 296 crores in Dutch-Bangla increased to Tk 2,125 crores or 5.54 percent and in UCB Tk 293 crores increased to Tk 3,100 crores or 6.64 percent.
On the other hand, Premier Bank’s defaulted loans increased by Tk 283 crores to Tk 1,279 crores or 4.75 percent at the end of June. Besides, Tk 243 crores in Padma Bank, Tk 141 crores in Uttara Bank, Tk 67 crores in Standard Bank, Tk 60 crores in Dhaka Bank, Tk 48 crores in Meghna Bank, Tk 44 crores in Mutual Trust, Tk 38 crores in BRAC Bank, Tk 25 crores in Madhumati, Tk 21 crores in Community Bank and ICB Islamic Bank Tk 1.00 crore defaulted loan has increased.
Defaults increased in six foreign banks: At the end of last June, defaulted loans in nine foreign banks were Tk 3,197 crores or 4.80 percent, which was Tk 3,042 crores or 4.90 percent in March. In other words, in three months, defaulted loans have increased by Tk 155 crore in these banks.
According to the report, bad loans have increased in six out of nine foreign banks in the three months. In three months, Bank Al Falah’s defaulted loans increased by Tk 1 crore and Commercial Bank of Ceylon’s increased slightly to Tk 63.10 crore. Apart from this, non-performing loans increased by Tk 133 crores in Hong Kong and Shanghai Banking Corporation (HSBC), Tk 2 crores in Standard Chartered Bank, Tk 4 crores in State Bank of India and Tk 35 crores in Wori Bank.
Defaults have increased in two of the three specialized banks
At the end of June, defaulted loans in the three specialized banks stood at Tk 4,753 crore or 12.14 percent, which was Tk 4,732 crore or 12.80 percent at the end of March. In three months, Rajshahi Agricultural Development Bank’s defaulted loans increased by Tk 31 crore and Prabasi Kalyan Bank’s Tk 12 crore.
According to sources, the government is taking loan assistance of $4.7 billion from the International Monetary Fund (IMF) to overcome the dollar crisis. Among the conditions of obtaining this loan, the default loan has been reduced to 10 percent, which has not happened. Because currently the rate of defaulted loans is above 10 percent. Therefore, last Wednesday, the company expressed concern about the defaulted loan with Bangladesh Bank. The company wants to know the reason for the increase in defaulted loans. At that time Bangladesh Bank informed that the rescheduled loans are defaulting again. Therefore, it is reported that the rate of defaulted loans has increased.
If asked, the former governor of Bangladesh Bank Salehuddin Ahmed told Daily Industry that the increase in defaulted loans is very worrying for the banking sector. Bangladesh Bank discount policy is mainly responsible for this. The more such benefits are given, the more defaulted loans will increase. Rescheduled loans are also defaulting now. It is wrong policy of Bangladesh Bank. Banks should be directly notified of default without rescheduling facility. Instead of doing so, more facilities are being given, resulting in higher rate of increase in defaulted loans.
He also said that credit cards, online services and various facilities of banks are stopped in case of default in other countries of the world. Not even allowed to board the plane or metro. But in Bangladesh it is the opposite. Those who do not obey the law, are given more privileges. In the past few years, the highest number of defaulted loans has increased. It is mainly due to weak and wrong decisions of Bangladesh Bank. Bangladesh Bank has to emphasize to reduce defaulted loans.
When asked, Bangladesh Bank Executive Director and Spokesperson Mejbaul Haque told Daily Industry that some large loans defaulted again due to failure to pay installments of rescheduled loans, due to which defaulted loans increased. Many others did not want to reschedule. Other factors will be analyzed and identified.

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