Published in New Nation on Wednesday, 22 November 2017
Banking sector beset with default loans
Kazi Zahidul Hasan
The defaulted loan in the banking sector increased by Tk 6,159 crore or 10.67 per cent in the third quarter (July- September) this year compared to the previous quarter (April-June) thanks to banks’ reckless lending practices.
Insiders said the situation is dire at public banks, which held the highest amount of default loans among other banks in the country during the period under review.
The amount of default loan at banks increased to Tk 80,307 crore as of September from Tk 74,148 crore as of June this year, according to a Bangladesh Bank (BB) latest data.
The total amount of outstanding loan was Tk 7,52,730 crore in September, which was Tk 7,31,625 crore in June this year.
The amount of defaulted loan at public banks stood at Tk 38,517, private banks at Tk 33,973, specialized bank at Tk 5,518 and foreign banks at Tk 2,298 crore in the third quarter this year.
Economists, however, expressed grave concern over the rising trend in the default loans saying that it is gradually affecting the financial health of the banks as well as hampering the economic growth of the country.
“Soaring defaulted loans underlines the gravity of the problem in the banking sector. Mounting defaulted loans consequently constricting the much needed credit flow to the various economic sectors affecting GDP growth,” Distinguished Fellow of the Centre for Policy Dialogue (CPD) Mustafizur Rahman told The New Nation yesterday.
He said big borrowers are failing to repay their loan installments in time pushing up the default loans. Large loan scams are also responsible for rising defaulted loans. “It’s reducing the banks’ capability to provide fresh loans as well as eroding their financial health,” he added.
“A growing default culture has led to a high default amount in the banking sector. Many big borrowers are not repaying their loans willfully although they have the capacity to pay. It is time to take tough stance against the willful defaulters to save the country’s banking sector,” former BB Deputy Governor Dr Khondoker Ibrahim Khaled told The New Nation.
“Reckless lending also contributed to the rise in defaulted loans,” he said, adding, “The central bank should speed up its monitoring process to prevent further rise in default loans”.
“The banking sector has been beset with default loans due to sluggish business climate. Many businessmen said that their business was going sluggish leading them to no-payment of their installment contributing to the increase in such loans,” a Senior Executive of private bank told The New Nation yesterday asking not to be named.