When it comes to our financial sector, very few factors have had as big an adverse impact than non-performing loans (NPLs), especially those from willful defaulters. But when that culture seeps into an entire industry, there are far bigger implications regarding not just our financial sector but our overall economic growth as well.
According to a recent Dhaka Tribune report, the majority of loans within the Bangladeshi manufacturing industry are not being repaid as scheduled, and that the overall proportion of NPLs in the industrial sector has risen to 55.10%, equivalent to Tk66,483 crore. The gross NPL ratio within this sector was 0.97 percentage points higher than the overall gross NPL ratio of the industry, signifying that the 9.13% gross NPL ratio within the manufacturing sector surpasses the industry's average of 8.16%.
As pointed out in the Bangladesh Bank Financial Stability Report 2022, the high gross NPL ratio (22.43% in 2022) in the ship-building and ship-breaking sub-sector remained another major concern, which was 18.75% in the previous year.
This is worrisome, to say the least.
As a nation that is still diversifying its manufacturing industries, the rising tide of NPLs in this sector can absolutely cripple far before it can achieve that goal. The sheer proportion of bad and loss loans has been on an upward trend since as far back as 2012 and has remained above 80% of the gross NPL over the years.
Defaulted loans are jeopardizing the country’s banking sector for years now, and it is a grave problem that has been brewing right under the noses of regulators and law enforcement authorities, yet the solution remains elusive. While tighter regulations can soften the blow they also stand to badly impact legitimate enterprising new industries from getting a loan that can genuinely help them.
This is an issue of accountability. The government and the authorities concerned need to hold will defaulters accountable, no matter their political affiliations, and steadily introduce some much needed discipline in our hemorrhaging banking sector.
