Latest
Home / CPD in the Media / Professor Mustafizur Rahman on banking and loan disbursement

Professor Mustafizur Rahman on banking and loan disbursement

The central bank should speed up its monitoring process to ensure the quality of loan disbursement, otherwise the defaulted loans will increase further, he said.

Published in New Age on Monday, 14 September 2015.

Defaulted industrial loans soar by Tk 3,675cr
Rise to Tk 18,901cr in FY15 due to political unrest, banks’ bad practice

AKM Zamir Uddin

Defaulted loans in the industrial sector skyrocketed by Tk 3,675 crore in last financial year FY 2014-15 due to political unrest and violation of rules and regulations by banks in loan disbursement.

According to the latest Bangladesh Bank data, defaulted industrial loans stood at Tk 18,901.27 crore in the FY15, rising by 24.14 per cent from that of Tk 15,225.90 crore in the FY14.

In FY14, defaulted industrial loans came down to Tk 15,225.90 crore from Tk 15,553.05 crore in FY13.

Economists and experts said the industrial sector faced a major setback in last financial year due to political violence that fuelled the defaulted loans in the sector.

Besides, indiscriminate loan disbursement by banks also resulted in soaring defaulted credit in the industrial sector, they said.

‘One of the main causes of the rise in the defaulted loans in the industrial sector in the FY15 was political turmoil,’ former BB governor Salehuddin Ahmed told New Age on Sunday.

The country witnessed political unrest in the third quarter of the FY15 that ultimately put an adverse impact on the industrial loan situation, he said.

He said political turmoil in 2013 and 2014 had put a long-term affect on business sector.

Due to the political instability, a good number of businessmen failed to repay instalments of their loans in due time, increasing the classified loans, Salehuddin said.

Besides, entrepreneurs were also reluctant to make fresh investment in the period, he said.

The high rate of interest on the industrial loans was another reason for the increase in the defaulted loans in last financial year, he said.

Sometimes, banks dillydally to disburse working capital to investors resulting that they (investors) plunge into the defaulting zone, the former BB governor said.

Centre for Policy Dialogue executive director Mustafizur Rahman told New Age on Sunday that there was question about the disbursement process of banks loans.

The classified loans in the industrial sector increased in the FY15 as banks did not disburse the loans to the proper clients, he said.

The central bank should speed up its monitoring process to ensure the quality of loan disbursement, otherwise the defaulted loans will increase further, he said.

Due to an increase in non-performing loans, banks’ financial health will be vulnerable that also will weaken the corporate governance, he said.

Moreover, the defaulted loans play a significant role in increasing the interest rate of bank loans, he said.

The BB data, however, showed that industrial loan disbursement by banks and non-bank financial institutions increased significantly in the FY15.

Banks and NBFIs disbursed industrial loans amounting to Tk 2,19,330.12 crore in the FY15 against Tk 1,68,413.91 crore in the FY14.

A BB official told New Age on Sunday that there was no reason for the rise in the industrial loans in the period as the businesspeople were reluctant to expand their business due to the political unrest.

He said, ‘To get more loans, the businesspeople convinced the banks that their previous loans would be defaulted due to the sluggish business if fresh loans were not disbursed in favour of them.’

Industrial loan disbursement by five state-owned commercial banks — Sonali, Janata, Agrani, Rupali and BASIC — increased by 44.07 per cent to Tk 5,066.20 crore in the FY15 from Tk 3,516.59 crore in the FY14.

The defaulted loans in the SCBs, however, decreased by 1.04 per cent to Tk 4,965.38 crore in the FY15 compared with that of Tk 5,017.53 crore in the FY14.

Loan disbursement by three state-run specialised banks — Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Bangladesh Development Bank — dropped by 30.66 per cent to Tk 2,934.21 crore in the FY15 from Tk 4,231.41 crore in the FY14.

The defaulted loans in the specialised banks increased by 57.15 per cent as their non-performing loans stood at Tk 4,012.68 crore in the period against Tk 2,553.40 crore in the FY14.

Industrial loan disbursement by the private commercial banks increased by 27.70 per cent to Tk 1,71,315.29 crore in the FY15 against Tk 1,34,154.18 crore in the FY14.

The defaulted loans in the PCBs increased to Tk 7,824.18 crore in the FY15 from Tk 6,318.86 crore in the FY14.

The foreign commercial banks disbursed industrial loans amounting to Tk 29,049.45 crore in the FY15 against Tk 18,955.97 crore in the FY14 while their defaulted loans increased to Tk 533.29 crore from Tk 440.14 crore.

Comments

Check Also

Financial Express, Page 05,  April 21, 2016

Leaping to a higher growth trajectory: Op-ed citing the State of Bangladesh Economy in FY2015-16 (second reading)

Published in The Financial Express on Thursday, 21 April 2016 Opinion Leaping to a higher growth trajectory Jafar …

Leave a Reply

Your email address will not be published. Required fields are marked *