To say that bad loans are a worry for Bangladesh is calling water wet. Loan defaulters continue to be emboldened and act with more and more impunity, and it appears that we continue to do nothing about it.
This is indeed one of our grossest failures, one that stands in stark contrast to our numerous achievements that have rightfully and deservedly earned us plaudits from home and abroad. Yet, it is safe to say that as long as loan defaulters continue to run rampant, we can not reach our full potential as an economy.
In the midst of it all is Bangladesh Bank's surprising decision to relieve banks from the liabilities of default loan recovery by finding a stop-gap solution -- by increasing banks' loan write-off capability up to Tk5 lakh, by 150%.
It is no surprise then that bankers and economists have sounded an alarm, saying that these extended write-off facilities in actual default loan count will not send a good message, rather acting as a camouflage to shelter willful defaulters and normalizing bad loans. Zahid Hussain, lead economist consultant at the World Bank Dhaka office, correctly identified that this will not help improve the overall health of the financial sector as it does not have any message for realizing the bad loans from the big defaulters.
As of September 22 last year according to data from the Bangladesh Bank, defaulted loans stood at Tk134,000 crore -- a truly shocking number that tells us just how fractured the overall system is. What is even more egregious is that in less than two decades, banks have also written off loans worth Tk58,000 crore.
This cannot be how a country with ambitions such as Bangladesh functions. It begs repeating: As long as bad loans continue to be normalized, its amount will continue to increase, and we will continue to be held back as an economy.
