Grappling with the massive pileup of non-performing loans, banks have resorted to auctioning mortgaged assets of their defaulting clients.
State-run Janata Bank, once a healthy financial institution, is now a textbook example of how bad loans put a bank to a quagmire.
With non-performing loans (NPLs) surpassing 65% of its portfolio – a crisis resulting from unchecked lending to major conglomerates such as Beximco and S Alam groups, left the bank to a situation that it’s trying to recover money by auctioning mortgaged assets.
Having to make an aberration in sanctioning a fresh loan to its topmost loan-defaulting client recently, Janata Bank is now desperately exploring the option of realizing money from other defaulters by auctioning their mortgaged assets.
In November, 2024, Janata rejected a Beximco Group plea for a Tk60 crore loan to pay employees' salaries for October.
And a month later Bangladesh Bank exempted relevant clauses of bank company act allowing Janata to make Tk180 crore ‘salary bailout’ for Beximco, a client that has long crossed the maximum ceiling of loan limit.
Now in very beginning of the new year – 2025 – the state-run Janata put on auction many mortgaged assets of its other top defaulting clients - Ranka Denim Textile Mills Ltd being the latest.
On Friday, Janata Bank made public announcement seeking to auction over 600 decimals of mortgaged lands and factories and other under-construction establishments of Ranka – one of the bank’s top 10 loan-defaulting clients. Ranka Denim owes Janata over Tk464 crore and other interests.
Over the past one week, Janata Bank also announced auctioning of several thousand decimals of lands as mortgaged assets of different concerns of S Alam Group. According to auction notices, the outstanding loans of S Alam Super Edible Oil amount to Tk1,008 crore, while those of S Alam Refined Sugar and S Alam Vegetable Oil are Tk1,777 crore and Tk1,756 crore, respectively.
According to banking sources, over Tk30,000 crore in loans taken by Beximco and S Alam groups from Janata Bank have become non-performing.
Ranka Denim Textile Mills, an entity whose name was pronounced among 300 big loan defaulters in the country in the parliament back in 2019, comes under the radar again as Janata on Friday announced auctioning of its mortgaged assets.
Then Finance Minister AHM Mostafa Kamala gave statistics that Ranka was in default with Tk222 crore in 2019.
Ranka is now among top 10 big loan defaulters of Janata Bank.
Also, on Friday, Bank Asia gave announcement of auctioning of mortgaged properties of Anwar Khan Modern Hospital at Dhanmondi for defaulting on over Tk24 crore.
Highest ratio of defaulted loans in South Asia
Defaulted loans in Bangladesh's banking sector hit a record Tk2,84,977 crore, at the end of 3rd quarter in 2024, as loans disbursed through irregularities to Awami League-affiliated businesses turned sour at an alarming pace with the fall of Hasina-government through July Revolution.
Central bank data shows, between July and September, last year the bad loans soared 34.8% or by a staggering Tk73,586 crore.
The banking sector insiders fear that the default loan figure might see a significant increase if the Bangladesh Bank goes ahead with its plan of tightening the classification rules for all types of loans by March this year, in pursuit of meeting the International Monetary Fund's loan conditions.
Bangladesh fares worst in South Asia in terms of its highest ratio of defaulted loans. Nearly 17% of the country's total disbursed loans have gone bad.
