The rate of increase in defaulted loans in the country’s banking sector soared to 9.23 per cent in 2016, which is double the international standard, said banking experts at a workshop on Thursday.
They said that defaulted loans were the main reason for the dismal condition of the country’s banking sector with the rate of interest on loans remaining out of the common people’s reach and good borrowers facing harassment.
Bangladesh Institute of Bank Management organised the workshop on Treasury Operations of Banks 2016 with its director general Toufic Ahmed Chowdhury in the chair at the BIBM auditorium in Dhaka.
In his key-note paper, BIBM professor Nehal Ahmed showed that the annual rate of increase in the defaulted loans rose in 2016 to 9.23 per cent, which is double the international standard, from 8.93 per cent in 2013.
He said that the defaulted loans had increased rampantly because of relaxation of loan rescheduling policy. ‘This trend of increase in defaulted loans has become a threat to the country’s banking sector,’ he said.
BIBM director Shah Md Ahsan Habib, NRB Bank managing director Mahmud Hossain, The City Bank additional managing director Faruk Moiuddin and other high officials of different public and private banks were present at the workshop.
The speakers at the workshop said that the capital shortfall situation of the state-owned commercial and specialised banks was also in a dismal condition, which is deteriorating.
As a result, the overall capital adequacy ratio in the banking sector has been declining for the last few years, they said.
The amount of capital shortfall in banking sector stood at Tk 5,000 crore, according to the latest Bangladesh Bank calculation.
Speaking on the occasion, Toufic said that the defaulted loans were bringing havoc to the banking sector.
‘The banks are charging good borrowers high interest on loans to mitigate the losses they suffer from the defaulted loans. If the situation could not be controlled, the whole banking system will face bad situation,’ he said.
NRB Bank MD Mahmud said that the bank officials needed to be more cautious about the treasury management.
He said that the government should not change policy regarding the banking sector time and again and there should be a fixed policy in this regard.
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