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Bad debts plague banking sector

  • Published at 01:25 am March 26th, 2018
Bad debts plague banking sector
Bangladesh’s banking sector is witnessing a pile up of bad loans at an alarming rate with the borrowers showing a rising tendency of defaulting on loan payments. Experts have blamed the situation on the lack of good governance in the banking sector. Figures provided by the central bank revealed that the defaulted loans stood at Tk22,644 crores at the end of 2011. Six years later, the amount swelled to Tk74,303 crores. Fazle Kabir, the central bank governor, dubbed loan default a grave problem, saying it had regulators worried. Currently, state-owned Sonali Bank has the highest amount of defaulted loans, or nonperforming loans, followed by BASIC, and Janata Bank. Among the private banks, Islami Bank tops the list of banks with highest default loans, according to the central bank. The amount is zero for Shimanto Bank Ltd, which is fully owned by Border Guard Bangladesh Welfare Trust. Sonali Bank had accumulated Tk13,771 crores of nonperforming loans until December last year, the Bangladesh Bank report showed. The amount is Tk7,599 crores for BASIC Bank, Tk5,819 crores for Janata Bank, Tk5,116 crores for Agrani Bank and Tk4,251 crores for Rupali Bank. Bangladesh Development Bank has a total of Tk771 crores of bad loans, while state-owned Bangladesh Krishi Bank has Tk4,263 crores and Rajshahi Unnayan Bank has Tk1,162 crores. the private banks, the Islami Bank has a total defaulted loan amount of Tk2,529 crores. It is followed by Pubali Bank with Tk1,898 crores and United Commercial Bank with Tk1,807 crores, National bank with Tk1,611 crores and Exim Bank with Tk1,340 crores of defaulted loans. Former central bank governor Salehuddin Ahmed said he believed that lack of good governance was responsible for the situation. He blamed the weakness of the regulator for the rising defaults. “The increase in defaulted loans is not only a matter of concern for the banking sector but also for the economy,” he said. Former Bangladesh Bank deputy governor Khondkar Ibrahim Khaled said there were widespread irregularities in disbursing loans by both the state-owned and private banks in the last six years. “The loans given out through irregularities have turned into defaulted loans,” he said. The central bank report showed that private AB Bank had nonperforming loans of Tk967 crores, Al-Arafah Islami Bank Tk992 crores, Bangladesh Commerce Bank Tk434 crores, Bank Asia Tk723 crores, BRAC Bank Tk721 crores, Dhaka Bank Tk761 crores, Dutch-Bangla Bank Tk962 crores, and Eastern Bank Tk325 crores. Apart from them, First Security Islami Bank had Tk839 crores, ICB Islami Bank Tk707 crores, IFIC Bank Tk1,048 crores, Jamuna Bank Tk525 crores, Meghna Bank Tk93 crores, Mercantile Bank Tk693 crores, Midland Bank Tk43 crores, Madhumati Bank Tk8 cores of default loans. The amount is Tk495 crores for Mutual Trust Bank, Tk662 crores for NCC Bank, Tk55 crores for NRB Bank, Tk77 crores for NRB Commercial Bank and Tk61 crores for NRB Global Bank. According to the central bank, One Bank has a total default loans of Tk829 crores, Premiere Bank Tk561 crores, Prime Bank Tk926 crores and Shahjalal Islami Bank has default loan of Tk630 crores. Default loan of SIBL stands at Tk909 crores. South Bangla Agriculture Bank has accumulated default loans of Tk30 crores, Southeast Bank Tk1,131 crores, Standard Bank Tk935 crores, City Bank Tk1,001 crores, Farmers Bank Tk723 crores, Trust Bank Tk578 crores, Union Bank Tk57 crores and Uttara Bank Tk695 crores. Bangladesh Bank data show that among foreign banks, Al-Falah Bank has a total defaulted loan amount of Tk25 crores, Citibank NA Tk22 crores, Commercial Bank of Ceylon Tk32 crores, Habib Bank Tk42 crores, HSBC Bank Tk157 crores, National Bank of Pakistan Tk1,377 crores, Standard Chartered Bank Tk474 crores, State Bank of India Tk15 crore and Woori Bank Tk7 crores. Until December, 2017, six state-owned banks have disbursed loans of Tk1,40,769.93 crores. Of the amount, Tk37,326 have turned into default loans which is 26.52% of the loans disbursed by these banks. During the same period, private banks have given out loans of Tk6,03,603.24 crores. Tk29,396.19 of the amount have turned into default loan. It is 4.87% of these banks’ disbursed amount. Two state-owned specialized banks have so far given out loans of Tk23,199.69 crores. Of them, Tk5,426.30 crores or 23.39% of these banks’ disbursed loans have become bad loans.   This article was first published on banglatribune.com