Bad loan in half a dozen state-owned banks including scam hit Sonali, Janata and BASIC increased by 5,182 crore in January-March period as the recovery efforts were slowed down due to an impending new loan restructuring policy adopted in May, experts said.
Five state-owned commercial banks Sonali, Janata, Agrani, Rupali, BASIC and the specialised Bangladesh Development Bank Ltd, however, showed unwillingness by the borrowers to clear debts and stay order from the High Court as the reasons for the recent sharp rise in bad loans in their portfolios.
They highlighted the reasons last week while responding to queries by the financial institutions division, said the division officials.
On June 23, the FID directed the banks to reason out why the bad loans increased in January-March 2019 in their portfolios from its previous quarter of October-December 2018.
The FID queries came against their repeated previous directives to the banks to bring down the amount of bad loans by bolstering the recovery efforts.
Former Bangladesh Bank governor Khondkar Ibrahim Khaled said the sharp rise in defaulted loan in the state-owned banks was not surprising as the overall loan recovery was slowed down against the impending new loan rescheduling policy.
The new loan rescheduling policy allowing errant borrowers to pay only 2 per cent down payment of outstanding loan against the previous 11 to 12 per cent has been made effective by the Bangladesh Bank last week.
But much before the new policy, which was adopted by Bangladesh Bank in May, borrowers stopped making payment on debts, he said.
Financial institutions division secretary Ashadul Islam did not want to make any comment on whether they were satisfied with the replies by the state-owned banks against the queries.
He told New Age on Sunday that the division was working to reduce the defaulted loans of the state-owned banks.
The division insiders said loan recovery was interrupted greatly against the backdrop of the announcement by finance minister AHM Mustafa Kamal to allow rescheduling of non-performing loans on easy conditions since the beginning of his incumbency as the finance minister in January.
Available data of the financial institutions division showed that bad loans in Janata Bank alone increased by a whopping Tk 4,185 crore in the January-March quarter due to failure by the bank’s clients Crescent Group and AnonTex to clear the loan repayment.
The total amount of bad loans of the Janata stood at Tk 17,304 as of December 2018, a threefold increase on Tk 5,818 as of December 2017.
Agrani Bank’s defaulted loan climbed to Tk 396.57 crore in the January-March quarter while Rupali’s bad loans increased by 239.57 crore during the same quarter.
Smarting under the loan scam involving Tk 3,500 crore to the little-known Hallmark Group in 2013, Sonali saw an increase in bad loans which stood at Tk 176.20 crore in the January-March quarter.
BASIC bank, which was on the verge of bankruptcy due to shady loan of around Tk 6,000 crore distributed by the previous board of directors led by controversial chairman Sheikh Abdul Hye Bacchu from 2009 to 2014, added Tk 172.27 crore as bad loans to its portfolio.
Sonali is yet to recover a single penny out of the Hallmark loan scam while Sheikh Abdul Hye Bacchu remains scot-free as the Anti-Corruption Commission failed to include his name in the cases filed in connection with the loan scam in once profitable BASIC bank.
Ibrahim Khaled noted that the new loan rescheduling policy might bring down the amount of defaulted loan for the time being but the entire banking sector as well as the economy would suffer in the long run.
The previous policy on loan restructuring policy issued by Bangladesh Bank in 2015 was made easier than its first policy adopted in 2003.
But it did not help in reducing the bad loans.
On June 22, AHM Mustafa Kamal said in the parliament that the overall amount of default loan in the banks and financial institutions increased by Tk 43,210 crore to at Tk 1,02,315.19 lakh crore in December 2018 from Tk 59,105 crore at the end of September 2015.
The finance minister also said that the number of loan defaulters also increased by 58,436 during the same period.
Policy Research Institute chairman Zaidi Sattar said that repeated loan restructuring policies proved that the state-owned banks were at ‘the mercy of the loan defaulters’.
The loan defaulters got a new lease of life at the cost of state-owned banks, he said.
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