Banks’ defaulted loans swelled to Tk 1,16,288 crore, end September from Tk 1,12,425 crore in June as the special loan rescheduling policy encouraged borrowers to be chronic defaulters.
With the addition of fresh Tk 3,863 crore in defaulted loans during July-September, the ratio of defaulted loans increased to 11.99 per cent from 11.69 per cent of the outstanding loans.
Economists and bankers attributed the situation to the politically motivated move to reschedule the repayments in easy terms that instigated the borrowers, even the individuals and entities with good repayment record, to refrain from repaying instalments to avail the new opportunity.
They also said that the measures taken by the government does not provide any sign to improve the ailing banks, instead the facilities provided to the defaulters would instigate further degradation of their morality, resulting in deterioration of the banks.
In January, when the Awami League-led alliance formed the government for the third consecutive term, finance minister AHM Mustafa Kamal, immediately after taking charge, assured the nation that there would be no further increase in defaulted loans.
But the defaulted loans increased by 23.83 per cent or Tk 22,377 crore from January to September, compared to Tk 93,911.4 crore in December.
Rescheduling defaulted loans for 10 year with one year’s grace period on two per cent down payment only intensified the default loan crisis, said bankers.
On May 16, the government floated the special rescheduling opportunity which is still open to the defaulters.
By adding the written off loans to the tune of Tk 53,258 crore and the loans amounting to Tk 80,000 crore, the recovery of which was stalled due to court proceedings, the total defaulted loans would be Tk 2,49,546 crore.
Asked why the defaulted loans are swelling, former caretaker government adviser and economist AB Mirza Azizul Islam told New Age, ‘There is no reason for improvement in the outlook.’
‘When the repayment schedule of defaulted loans are extended by 10 years at nine per cent interest and the borrowers with good payment records are made to repay in three or four years at 13-15 per cent interest,’ means pampering the defaulters and punishing the good borrowers, he said.
Replying to a question about the finance minister announcement to bring down defaulted loans, Mirza Aziz said, the minister might say it but the policy package instigated the defaulters’ moral degradation.
He found no reason to accept the government’s assurance to contain defaulted loans as ‘credible’.
To reduce the defaulted loans, he suggested for ensuring prompt punitive measures against the defaulters including confiscation of their collaterals. Besides, measures should be taken to provide no political shelter to the defaulters.
The defaulted loans in the banking sector includes Tk 54,922 crore in defaulted loans of state-owned banks, Tk 54,574 crore of private commercial banks, Tk 5,400 crore of specialised banks and Tk 2,091 crore of foreign banks.
The banking sector was hit by a series of scams and irregularities since AL took power in 2009, including Tk 3,572.98 crore of Janata Bank by five subsidiaries of the Crescent Group and another of Tk 5,508 crore by AnonTex in fiscal 2018-19 alone.
In 2012, Bismillah Group swindled about Tk 1,100 crore from Janata Bank and the Hallmark Group siphoned off about Tk 3,500 crore from Sonali Bank in 2013.
In 2016, investigations by the central bank found that Farmers Bank, later renamed Padma Bank, sanctioned and disbursed loans and hid defaulted loans amounting to about Tk 400 crore in gross violation of banking rules.
Followed by the scams, the government was forced to restructure the Farmers Bank and injected funds from the other government banks.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking