Defaulted loans grow 191pc in 8yrs

Experts link it with capital flights

Shakhawat Hossain with AKM Zamir Uddin | Published: 00:05, Jul 12,2017 | Updated: 00:24, Jul 12,2017

 
 

Defaulted loans in the country’s banking sector recorded 191 per cent growth in the past eight years demonstrating that the culture of bad loan gained a foothold further during the back-to-back tenure of the Awami League-led government.
Experts, however, linked the massive growth of defaulted loans with illegal capital flight which marked substantial rise during the same period.
They said that the government should speed up the legal process in the Artha Rin Adalat (financial loan court) to recover the non-performing loans that stood at Tk 1,11,347 crore until April 2017 despite relaxation of loan rescheduling policy.
Official data of the Bangladesh Bank showed Tk 36,150 crore of the defaulted loans as write-offs.
In a sharp contrast, the central bank data showed that the defaulted loan was Tk 38,148 crore including Tk 15,667 crore write-off in 2009 when the Awami League government assume power.
Former interim government adviser Mirza Azizul Islam told New Age on Tuesday that major portion of the credit was sanctioned in the back-to-back tenures of the present government on political consideration.
The banks failed to recover those loans as the defaulters used political links, he noted.
He suspected that many of the defaulters were resorting to send the money abroad, he said.
The rise of capital flights from the country against the backdrop of lull in private investment was also evident in the latest data of deposits by Bangladeshis in Swiss banks.
The annual report released by the Swiss National Bank on June 30 revealed that deposits by Bangladeshis in Swiss banks increased
to CHF 667.40 million (equivalent to $694.15 million or about Tk 5,553 crore) in 2016 over CHF559.25 million (equivalent to $582.43 million or Tk 4,423 crore) in 2015.
The report showed that deposits in Swiss banks by Pakistanis decreased by 6 per cent to CHF 1.4 billion and by Indians decreased by 45 per cent to CHF 675.75 million in 2016.
Former Bangladesh Bank deputy governor Ibrahim Khaled said that a chunk of defaulted loans might have been laundered abroad in the recent years.
The state-run banks would be major victims of money laundering as their overall monitoring was weaker than the private commercial banks, he said.
Washington-based Global Financial Integrity, in its latest report in May 2017, said that illegal fund outflows cost Bangladesh $8.97 billion in 2014.
It also said that Bangladesh lost $75.15 billion due to trade miss-invoicing and other unrecorded outflows between 2005 and 2014 which demonstrated that the capital flight from the country was much higher than foreign direct investment the country received.
The foreign direct investment grew 4.38 per cent to $2.33 billion in 2016, according to United Nations Conference on Trade and Development.
Economists said that the defaulted loans would not pose much threat unless the errant borrowers laundered the money abroad.
They also said that corrupt people were transferring their ill-gotten money to abroad as the country had strategic deficiencies in checking capital flights.
Finance minister Abul Maal Abdul Muhith told parliament on Monday about the overall defaulted loans in the banking sector and disclosed 100 top defaulters.
He, however, did not give the amount of defaulted loans against the individual defaulters.
He did not also disclose how many loan defaulters were in the country.
On June 20, he had informed the parliament that 2,02,623 individuals or companies, who had borrowed money from 55 state-run and private commercial banks, defaulted on their loans till March 2017. 

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