Hasina leaves behind defaulted loans of Tk 1.89 lakh crore

Special Correspondent: Awami League President and former Prime Minister Sheikh Hasina fled Bangladesh on August 5 amidst a mass student and public movement, leaving behind defaulted loans totaling around Tk 2 lakh crores.
Sources reveal that as of the end of June this year, the defaulted loans in the country’s banking sector surpassed a record Tk 211,000 crore. After the changeover in government, the central bank began to move away from the practice of concealing defaulted loans, resulting in a significant increase in reported figures.
Most of these loans accumulated during Sheikh Hasina’s four terms in power. Over the past 15 and a half years under Awami League rule, defaulted loans have risen by Tk 189,391 crores. Influential businessmen and loan defaulters were consistently granted exemptions during this period. These exemption policies were implemented by two former Bangladesh Bank governors, Abdur Rauf Talukder and Fazle Kabir, according to central bank sources.
Experts believe that these exemption policies significantly contributed to the rise in defaulted loans. They argue that state sponsorship and concessions granted to defaulters over the years are the main reasons for the surge in non-performing loans. The definition of defaulted loans was repeatedly altered, and loan restructuring facilities were frequently provided by amending laws. These privileges allowed major debtors to avoid being classified as defaulters, making them even more powerful.
According to central bank data, by the end of June, total credit disbursements in the banking sector stood at Tk 1,683,396 crores. Of this, Tk 211,391 crore was classified as defaulted, accounting for 12.56% of total disbursements. In December last year, defaulted loans stood at Tk 145,633 crores, meaning that in just six months of Sheikh Hasina’s fourth and final term, defaulted loans increased by Tk 65,758 crores.
The Awami League returned to power for a fourth consecutive term in January. However, on August 5, the government collapsed in the face of mass protests, leaving four and a half years of the term unfinished.
State-owned banks currently hold the largest share of defaulted loans. At the end of June, defaulted loans in these banks amounted to Tk 102,483 crores, or 32.77% of total disbursements. In private banks, the figure stands at Tk 99,921 crores, or 7.94%. Foreign banks hold Tk 3,229 crores (4.74%), and specialized banks hold Tk 5,756 crores (13.11%), according to sources.
The International Monetary Fund (IMF) has imposed conditions on the approval of a $4.7 billion loan to Bangladesh. One of these conditions is that non-performing loans must be reduced to below 5% in private banks and below 10% in state-owned banks by 2026. However, the trend has been moving in the opposite direction, with defaulted loans continuing to rise.
During Sheikh Hasina’s first five years in office, defaulted loans increased by Tk 18,100 crores. In 2009, defaulted loans stood at Tk 22,480 crores, increasing slightly to Tk 22,710 crores in 2010. However, in 2011, defaulted loans decreased slightly to Tk 22,640 crores. In 2012, defaulted loans surged by Tk 20,000 crores to Tk 42,090 crores, and by the end of 2013, they decreased by Tk 1,500 crores to Tk 40,580 crores.
In the second term of the Awami League government, defaulted loans increased by more than Tk 53,000 crores, marking the highest rise in the banking sector during that period. In the third term, defaulted loans rose by over Tk 52,000 crores in five years.
Although the Awami League formed the government for a fourth time in January last year, Sheikh Hasina resigned as prime minister on August 5 in the face of mass protests. By June, just before the government fell, defaulted loans in the banking sector had reached Tk 211,391 crores.
The two former Bangladesh Bank governors, Fazle Kabir and Abdur Rauf Talukder, introduced various policies that contributed to the rise in defaulted loans. Abdur Rauf Talukder, who has been on the run since the fall of the government, resigned from an undisclosed location on August 9. He is accused of providing special privileges to the banks of S. Alam Group, allowing them to withdraw thousands of crores of Taka anonymously, leaving these banks in a precarious position. The new governor of Bangladesh Bank, Ahsan H. Mansur, has since dissolved the boards of these banks, freeing them from S. Alam’s influence.
During his two-year tenure as governor, Abdur Rauf Talukder oversaw an increase in defaulted loans by Tk 86,134 crores. He assumed office on July 12, 2022. By the end of June 2022, defaulted loans in the banking sector stood at Tk 125,257 crores. Before his resignation, this figure had risen to Tk 211,391 crores. Fazle Kabir, during his seven-year tenure, oversaw an increase of over Tk 65,000 crores in defaulted loans.
Following the formation of the government in 2009, efforts were made to adhere to international standards. In 2012, Bangladesh Bank issued a circular stating that no loan could be rescheduled more than three times. However, this policy was not upheld. Under pressure from influential figures, the central bank repeatedly altered the definition of defaulted loans and extended the grace period by three months.
The most significant case of political patronage occurred in 2015, when a special scheme was introduced to reschedule defaulted loans. Although the rule stated that loans could not be rescheduled more than three times, many influential entrepreneurs exploited this opportunity. Under this scheme, loans totaling approximately Tk 15,000 crores from 11 major industrial groups were restructured, but most of these groups later defaulted on their loan installments.
In 2018, the definition of defaulted loans was changed again, with the repayment period extended by another three months. Additionally, special concessions were granted for loan write-offs. In 2019, the then Finance Minister AHM Mustafa Kamal introduced the most extensive relief package for defaulters in the country’s history. Under the new rules, defaulters could regularize their loans with just a 2% down payment, and they were given 10 years to repay, with no installments due in the first year. Many of those who took advantage of this opportunity subsequently defaulted again.
Moreover, during the COVID-19 pandemic, Bangladesh Bank allowed significant leniency in loan repayments, which was withdrawn this year. Consequently, many borrowers were listed as “good customers” despite not repaying loans for two years, but they have since defaulted again after the grace period ended.