Bangladesh Bank's loan moratorium facility until the year’s end is to credit for the lower figure
Banks’ balance sheet had Tk 1,676.2 crore fewer default loans at the end of September from three months earlier thanks to the central bank’s extension of loan moratorium to help businesses to combat the economic fallout of the public health crisis.
At the end of September this year, the banking sector’s total default loans stood at Tk 94,440.5 crore, which was 8.88 per cent of the total outstanding loans, according to the data from the Bangladesh Bank (BB).
At the end of June, the sector’s total default loans stood at Tk 96,116.7 crore.
The bad loans of banks declined in first and third quarters of the year as the central bank has barred banks not to downgrade any loan for the borrowers’ failure to pay instalments in the January-December period this year, said a high official of the BB.
However, default loans edged up in the second quarter of the year owing to a technical reason, he said on condition of anonymity as he is not authorised to speak with the media.
“Some loans have been recovered even amid the pandemic. Some loans have been written off and many bad loans have become regularised through the special rescheduling policy,” said Abdul Halim Chowdhury, managing director of Pubali Bank.
That’s the reasons behind the declining trend of default loans, he added.
“The real picture of bad loans would be understood in the second quarter of next year,” Chowdhury added.
At the end of last year, bad loans stood at Tk 94,331 crore, down from Tk 116,288 crore three months earlier -- which was an all-time high -- owing to regularisation of a big chunk of defaulted loans through special rescheduling policy of the central bank.
In 2019, default loans amounting to Tk 50,434 crore were rescheduled, up 117.3 per cent from a year earlier.
Given the regulatory forbearance of the BB, the default loan data has become meaningless as a major portion of the outstanding loans has become irregular due to non-payment, said Ahsan H Mansur, executive director of the Policy Research Institute.
The bad loans will increase a lot when the loan moratorium facility, first announced on March 24, ends, said Mansur, who is also the chairman of Brac Bank.
The BB may extend the deadline on loan moratorium facilities further on a limited scale as businesses could regain their strength, he supposed.
Agrani though is trying to increase recovery from borrower amid the pandemic, said its MD Mohammad Shams-Ul Islam.
“The recovery drive should not stop in any situation,” he said, adding that the bank will ramp up its efforts next month ahead of the year’s end.
In the last one year, the default loans of the country’s banking sector declined by Tk 21,847.5 crore.