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NPLs keep soaring despite loan rescheduling

  • Published at 10:32 pm August 25th, 2019

It rises by Tk1,551 crore in three months till June

Non-performing loans (NPLs) of banks rose by a staggering Tk1,551 crore in three months till June this year, taking the amount of stress loan in the banking sector to Tk112,425 crore. 

As of June, the total bad loans accounted for 11.69% of the total disbursed loans of Tk9,62,077.26 crore, according to the latest Bangladesh Bank (BB) data. 

There is widespread criticism of economists, businesspeople and entrepreneurs in the banking sector over high amount of non-performing loans. 

AHM Mustafa Kamal has been very keen on reducing high amount of defaulted loans since taking over as finance minister. 

On April 25, Bangladesh Bank issued a new policy on loans classification and provisioning to reduce high amount of defaulted loans. It extended the time beyond which an amount of loan will be deemed to have been defaulted. 

The central bank also issued special policies on May 16 on loan rescheduling and one time exit. Through this, Bangladesh Bank offered the benefit of repaying with 2% down-payment with only 9% interest in 10 years (including one-year grace period). 

Despite these initiatives, the defaulted loans have continued to soar as experts think that there is a lack of transparency in the disbursement of loans. 

At the end of March 2019, the total non-performing loans in the banking system was at Tk110,874crore, or 11.87% of the total disbursed loans.

Economists and senior bankers blame the culture of impunity enjoyed by loan defaulters, political interference in approving loans, and lack of experience among bankers in dealing with pressing issues for bad condition of the banking sector.

At the end of June this year, of the total NPLs, defaulted loans of six state-owned commercial banks stood at Tk53,744.64 crore or 31.58% of their total disbursed loans. 

Defaulted loans of private commercial banks (PCBs) stood at Tk51,924crore or 7.13% of their total loans in the same month, the BB data said.

Zahid Hussain, former lead economist of World Bank in Bangladesh, said that in the last decade, the country did not encounter any disaster that could have prevented businesspeople from repaying their loans.

"The economic growth rate has increased and there has been economic stability in the country, but the number of willful defaulters has increased,” the economist noted.

He said the banks could not avoid the blame and responsibility for the soaring defaulted loans, as they were approving loans without "due diligence" or "considering the repayment capacity of borrowers."

Defaulted loans of foreign banks stood at Tk2,057.62 crore or 5.48% of their total loans till June, according to the BB data. 

NPLs of two specialized banks — Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank — stood at Tk4,696.83 crore or 17.82% of their total loans, the data said.

The non-performing loans of banks rose by Tk23,085c in the last one year to June this year. Total NPLs in the banking system was at Tk89,340.01 crore at the end of June, 2018.