Our banking sector continues its downward spiral due in no small part to the rising tide of non-performing loans. The most recent figures released by the central bank show a decided increase in the number of bad loans at private banks during the third quarter, but a curious decline of such in state-owned banks both of which followed by two instances of major rescheduling.
Regardless of the fluctuations, the pressure on the nation’s banking sector continues to mount under the load of NPLs, which continue to be among the biggest problems for our still-growing economy threatening to destabilize its very foundations.
So what exactly leads to so many bad loans being made to begin with?
There are legitimate reasons which feed this incredibly troubling phenomenon, from goods exporters delaying shipments, buyers canceling payments and orders, among others, but at the root of the problem is granting bad loans to willful defaulters, which invariably happens because of political influence. And with the central bank continuing to incentivize the practice by offering sizable waivers to loan defaulters, the situation has continued to get worse.
At the end of September, bad loans stood at 9.93% of the total outstanding loans, which stood at Tk1,565,000 crore. While this is a drop in the overall percentage compared to the April-June period, it is hardly an indication of a downward trend in the number of bad loans going forward.
The fact of the matter is that the overall development goals of any economy is completely dependent upon the health of its financial institutions. Which is why it is extremely concerning to see that, rather than holding willful defaulters accountable for the damage they continue to deal on our banking sector, the relevant administration seemingly continues to sweep this problem under the rug.
Bad loans are the result of our deeply rooted culture of impunity. If we want our economy to prosper, we need to unlearn these old traits.
Regardless of the fluctuations, the pressure on the nation’s banking sector continues to mount under the load of NPLs, which continue to be among the biggest problems for our still-growing economy threatening to destabilize its very foundations.
So what exactly leads to so many bad loans being made to begin with?
There are legitimate reasons which feed this incredibly troubling phenomenon, from goods exporters delaying shipments, buyers canceling payments and orders, among others, but at the root of the problem is granting bad loans to willful defaulters, which invariably happens because of political influence. And with the central bank continuing to incentivize the practice by offering sizable waivers to loan defaulters, the situation has continued to get worse.
At the end of September, bad loans stood at 9.93% of the total outstanding loans, which stood at Tk1,565,000 crore. While this is a drop in the overall percentage compared to the April-June period, it is hardly an indication of a downward trend in the number of bad loans going forward.
The fact of the matter is that the overall development goals of any economy is completely dependent upon the health of its financial institutions. Which is why it is extremely concerning to see that, rather than holding willful defaulters accountable for the damage they continue to deal on our banking sector, the relevant administration seemingly continues to sweep this problem under the rug.
Bad loans are the result of our deeply rooted culture of impunity. If we want our economy to prosper, we need to unlearn these old traits.