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State-owned banks account for 51% NPLs

  • Published at 10:06 pm December 3rd, 2019
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The Bangladesh Bank building at Motijheel Mehedi Hasan/ Dhaka Tribune

Zahid Hussain, former lead economist of World Bank in Bangladesh said the political interference in approving loans was wide spread in state-run banks than private banks

All nine state-run banks accounted for 51.27% of total non-performing loans (NPLs) of Tk1, 16,288.31 crore in the banking sector as of September this year. 

At the end of September, the non-performing loans of Agrani, Rupali, Sonali, Janata, BASIC, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Development Bank and Probashi Kallyan Bank stood at Tk59,622.91 crore, up Tk1,179.40 crore from the previous quarter, according to the latest data of the Bangladesh Bank.

Economists and senior bankers said the culture of impunity enjoyed by loan defaulters, political interference in approving loans, and lack of experience among bankers in dealing with pressing issues, weakened the already battered banking sector, particularly those of public sector banks.

Zahid Hussain, former lead economist of World Bank in Bangladesh said the political interference in approving loans was wide spread in state-run banks than private banks. 

“Many weak state-run organizations get favor from state-run banks to take loans but the organizations cannot return the loans.  On the other hand, the accountability of state runs banks are  weaker than those of private commercial banks,” he added. 

Zahid Hussain said that in the last decade, the country did not encounter any disaster that could had prevented businessmen from repaying their loans.

“The state run banks cannot avoid blame and responsibility for the soaring default loans, as they are approving loans without "due diligence" or "considering the repayment capacity of borrowers,” he pointed out.

According to the data, Janata Bank has the highest amount of default loans of Tk21,660.06 crore (44.57% of the total outstanding loans), followed by Sonali Bank with Tk12,747.04 crore (29.27% of its total outstanding loans). 

Agrani Bank’s default loans stood at Tk6,235.72 crore (16.15% of its total outstanding loans), Bangladesh Development Bank’s default loans stood at Tk914.97 crore (57.13% of its outstanding loans), BASIC Bank’s at Tk8,738.55 crore (58.62% of total outstanding loans), Rupali Bank’s at Tk4,626.15 crore (17.16% of total outstanding loans), Bangladesh Krishi Bank’s at Tk3,566.09 crore (17.20% of its total outstanding loans), Rajshahi Krishi Unnayan Bank’s at Tk1,099.94 crore (20.15% of its total outstanding loans) and Probashi Kallyan Bank’s at Tk34.38 crore (16.99% of its total outstanding loans), says the data. 

The non-performing loans of Sonali, Rupali, and BASIC were so overwhelming that they even failed to keep their required provisioning with the Bangladesh Bank.

At the end of September this year, state-run Sonali Bank faced at Tk2,456 crore provision shortfall, Rupali Bank’s provision shortfall stood at Tk996 crore and BASIC Bank faced at Tk3,021 crore provision shortfall,  according to BB data

Talking to Dhaka Tribune, former Bangladesh Bank Governor Salehuddin Ahmed said: “The rescheduling policies adopted recently by the government and the central bank for banking sector went in the wrong direction. The defaulters were given leverage by these policies. Good borrowers are now feeling discouraged to pay debts.”

The central bank must be rigorous to reduce the default loans and all the facilities extended to the defaulters should be scrapped immediately, he suggested. 

However, Agrani Bank Managing Director Mohammed Shams-Ul Islam said the big defaulters were very interested to reschedule their defaulted loans under the new rescheduling policy. 

Agrani Bank’s loans recovery from defaulters was increasing, he added, adding between January and October this year the bank recovered Tk1,500 crore.

“In the upcoming days, the country’s non-performing loans would be reduced because we have received many rescheduling applications from defaulters,” said Mohammed Shams-Ul Islam said.