Country’s banks recovered only about 21 per cent or Tk 9,490.39 crore of their written off loans in last 14 years as they (banks) did not take proper measures to recover the worst category of defaulted loans.
From January, 2003 to March, 2017, banks wrote off loans worth Tk 44,412.03 crore, according to the latest Bangladesh Bank data.
Of the amount, Tk 34,921.64 crore remained outstanding at the end of the first quarter (January-March) of this year.
BB officials and an expert said writing off uncollectible loans frequently was a bad practice as banks tried to show lower portfolios of defaulted loans in the way.
The central bank introduced the policy (loan write-off) in 2003 when Fakhruddin Ahmed, chief adviser to an army-backed caretaker government, was the BB governor with a view to cleaning up banks’ balance sheets, a BB official told New Age on Thursday.
But, the policy backfired as such practice played a role in deteriorating the banks’ financial health, he said.
Banks wrote off afresh defaulted loans worth Tk 24.76 crore in the January-March period of this year, the BB data showed.
The BB data, however, showed that the amount of banks’ total write-offs decreased to Tk 34,921.65 crore as of March 31, 2017 from Tk 36,150 crore as of December 31, 2016.
The written off loans decreased in the first quarter as some banks recovered some amount of the loans during the period.
Former BB deputy governor Ibrahim Khaled told New Age on Thursday that loan write-off by banks had been maintaining an upward trend for long.
‘Sometimes, the volume of written off loans decreases slightly, but it naturally maintains an increasing trend,’ he said.
The BB often gives directive about recovering the written off loans, but the initiative is not adequate, he said.
The central bank should bring the banks and defaulters under an accountability system with a view to speeding up the recovery process of the written off loans, Khaled said.
The BB data showed that the defaulted loans in the banking sector increased to Tk 74,148 crore as of June 30, 2017 from Tk 62,172.32 crore as of December 31, 2016.
Banks are allowed to write off loans when those become defaulted loans of bad or loss category.
Banks have to file law suits with Artha Rin Adalat against the defaulters and have to keep 100 per cent provision against the write-offs.
The BB data showed that eight banks had written off their bad debts in the first quarter of this year.
Janata Bank wrote off Tk 0.29 crore in the January-March period, Agrani Bank Tk 0.22 crore, Southeast Bank Tk 0.59 crore, The City Bank Tk 0.61 crore, HSBC Tk 3.52 crore, Standard Chartered Bank Tk 14.20 crore, State Bank of India Tk 0.18 crore and Woori Bank Tk 5.15 crore.
The amount of written off loans in the state-owned commercial banks decreased to Tk 17,732.30 crore as of March 31, 2017 from Tk 17,788.83 crore as of December 31, 2016 and that in the private commercial banks to Tk 16,078.78 crore from Tk 17,252.48 crore.
The amount of written off loans in the two state-run specialised banks — Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank — remained unchanged at Tk 555.18 crore.
The amount of written off loans in the foreign commercial banks, however, rose to Tk 760.63 crore as of March 31, 2017 from Tk 757.21 crore as of December 31, 2016.
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