THE amount of loans in default in six sate-owned banks, including Sonali, Janata and BASIC which earlier lost a huge amount of money to loan scams, registered a sharp increase, by Tk 51.82 billion, in the first quarter of the year. The increase at hand prompted the Financial Institutions Division to ask the banks concerned, on June 23, to establish why the amount of defaulted loans increased by such a measure on the figure of the last quarter of 2018. The state-owned commercial banks — Sonali, Janata, Agrani, Rupali and BASIC — and the specialised Bangladesh Development Bank gave the unwillingness of the borrowers to repay the loans as a reason. While defaulting on much of the loans is believed to be wilful in the absence of any stringency on part of the government to recover non-performing loans, many, even within the Financial Institutions Division, believe that the loan restructuring policy — allowing borrowers to reschedule the payment of loans for 10 years, including a one-year grace period, for a 2 per cent down payment of the outstanding loans — which the government could make effective in the past week was a reason for the increase in the amount of loans in default as repayment by borrowers slowed down.
The policy on the loan rescheduling was floated on May 16 and was stayed by the High Court until June 26 and the appeals court vacated the stay order on July 8. Even though the policy could be put in place after the second quarter of the year, the issue has been in conversations since the beginning of the year as the finance minister on assuming office in the third consecutive tenure of Awami League government in January announced an easy loan rescheduling policy. It is believed that the announcement of the policy, and its subsequent adoption, sent out a wrong signal that the government goes easy on loan recovery. While defaulters willing to repay their loans may have stopped so doing, new borrowers might have chosen to follow suit. Janata Bank topped the list of six banks by registering an increase of Tk 41.85 billion in the first quarter of the year while its total amount of loans in default was Tk 17,304 as of December 2018, which is a threefold increase on the figure of Tk 58.18 billion as of December 2017. The finance minister is reported to have said in the parliament on June 22 that the overall amount of loans in default in banks and financial institutions increased by Tk 432.1 billion to reach Tk 1023.15 billion in December 2018 from Tk 591.05 billion in September 2015. The number of loan defaulters is also reported to have increased by 58,436 in the same period.
The banks having already counted a huge amount of loans in default have run into more defaulted loans in the January-March quarter, further weakening the already ailing banking system. The banks giving defaulters, especially the wilful ones, an easy way to live off public money puts the banks at the mercy of the loan defaulters. Banks, and the government, must not be cowered by the loan defaulters.
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