City Bank, Prime Bank lead the way
The country’s banking sector wrote off another Tk 920.94 crore in bad debts in the April-June period of this year with The City Bank and Prime Bank leading the way.
The amount of bad debts written off by banks increased by Tk 885.18 crore in the second quarter of this year as The City Bank and Prime Bank wrote off total Tk 563.34 crore to bring down their defaulted loans and clean up their balance sheets.
The banking sector, however, in the period recovered Tk 168.13 crore from the bad loans they had earlier written off.
According to the latest Bangladesh Bank data, banks’ total write-offs of uncollectible loans increased to to Tk 42,321.96 crore as of June 30 while the figure was Tk 41,437.27 crore as of March 31 this year. The amount of write-off loans was Tk 41,237.44 crore as of December 31, 2015.
Write-offs in the banking sector usually increase when the defaulted loans in the industry maintain an upward trend, a BB official told New Age on Thursday.
The BB data showed that defaulted loans in the banking sector increased to Tk 63,375.59 crore as of June 30, 2016 from Tk 51,371.22 crore as of December 31, 2015.
The defaulted loans and the write-off loans together in the banking sector stood at Tk 1,05,697.55 crore at the end of the first half (January-June) of 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.
According to the BB officials, banks write off loans to show a lower portfolio of defaulted loans in their respective financial balances sheets, but the trend is harmful to the banks’ financial health.
The BB data showed that 15 banks wrote off Tk 920.94 crore in the April-June period of this year. Prime Bank wrote off Tk 289.12 crore, The City Bank Tk 274.22 crore, UCBL Tk 65.24 crore, Eastern Bank Tk 63.11 crore, BRAC Bank Tk 51.24 crore, Social Islami Bank Tk 44.54 crore, Dutch-Bangla Bank Tk 40.79 crore, Jamuna Bank Tk 33.65 crore, Dhaka Bank Tk 21.29 crore, Standard Chartered Bank Tk 13.99 crore, Bank Asia Tk 13.86 crore, Janata Bank Tk 6.72 crore, HSBC Tk 2.77 crore, ICB Islamic Bank Tk 0.22 crore and EXIM Bank Tk 0.18 crore.
Prime Bank managing director Ahmed Kamal Khan Chowdhury told New Age on Thursday that the clients usually failed to reschedule their defaulted loans if banks wrote off the non-performing loans.
He said, ‘Banks have to give 45 per cent tax against the provision they keep for defaulted loans. But, we do not require giving any tax against write-offs.’
As banks get no benefit from keeping the defaulted loans for a long period, Prime Bank wrote off the loans in line with rules and regulations, Kamal said.
The City Bank deputy managing director Md Abdul Wadud told New Age that the loan write-offs at his bank increase and decrease on quarterly basis.
He said, ‘We wrote off some large loans of a number of corporate groups. So the write-offs in the bank increased in the second quarter of this year. We tried to recover the loans but failed. So we were compelled to write off the loans.’
The amount of write-off loans in the private commercial banks increased to Tk 18,937.97 crore as June 30, 2016 from Tk 17,909.90 crore as of December 31,
2015 and that in foreign commercial banks to Tk 780.38 crore from Tk 705.65 crore.
The amount of write-off loans in the two specialised banks – Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank – remained unchanged at Tk 555.18 crore.
The amount of write-off loans in the state-owned commercial banks, however, slightly decreased to Tk 22,048.42 crore as of June 30, 2016 from Tk 22,066.71 crore as of December 31, 2015.
Former interim government adviser Mirza Azizul Islam told New Age on Friday that banks had written off their bad loans as their defaulted loans increased significantly in recent months.
The banks are trying to clean up their balance sheets by writing off their non-performing loans, but it has already put an adverse impact on the country’s banking sector, he said.
The BB, Office of Attorney General and finance ministry should take collective initiative to recover the write-off loans by speeding up the legal process, he said.
The government should form a separate tribunal in the shortest possible time to recover the write-off loans as huge amount of cases are now pending with Artha Rin Adalat, he said.
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