Published in New Age on Sunday, 30 November 2014.
Loan write-off spree grips banks after scams
Staff Correspondent
A whopping amount of bad loans of Tk 15,667 crore was written off during the last five years which was almost half of such loans erased by the banks from their balance sheets since the system of loan write-off was introduced in 2002.
According to Bangladesh Bank, loans of Tk 31,500 crore have so far been written off as of March 2014.
Annual average amount of write-off loans stood at Tk 3,066 crore in the last five years, while it was about Tk 1,583 crore till 2009.
The rise in writing off the bad loans has been attributed by critics to the relaxed policy Bangladesh Bank introduced in 2013 to allow banks to get rid of bad loans having maturity of two years from previous five years.
Critics said that the policy followed the growing classified loans and big scams, like embezzlement of Tk 3,600 crore by little-known Hallmark Group from Sonali Bank, in the banking sector.
The banks are taking opportunity of writing off bad loans as a ploy to cover up their corruptions and mismanagements, they said.
The banks keep 100 per cent provision from profit as part of writing off bad loans from the balance sheet, by which they deprived share holders of due profits and pushed up operational costs, the critics added.
The current trend was contrary to the commitment made by Bangladesh Bank governor Atiur Rahman who wanted a change in culture of debt write-off at a Meet the Press arranged by Dhaka Reporters Unity on May 2, 2010.
‘I will in no way tolerate this culture of waiving default loans,’ he had noted.
Atiur’s predecessor Saleh Uddin Ahmed said that policymakers of the present government were only engaged in tall-talks.
‘In reality, there is no action, so far, taken by the government to pull out the banks from the abysmal state,’ he told New Age in the past week.
The state-owned four commercial banks are ahead in writing off bad loans.
According to Bangladesh Bank data, four state-owned banks have written
off loans of Tk 15,228 crore until March 2014 since 2002.
Of the amount, the share of Sonali Bank stood at Tk 5,850 crore, Agrani Bank Tk 5,011 crore, Janata Bank Tk 3,348 crore and Ruplai Bank Tk 1,019 crore.
Twenty-seven of the 39 private banks waived bad loans of Tk 12,517 crore and four state-owned specialised banks waived Tk 3, 261 crore.
Central bank officials said that Agrani Bank’s corporate branch at Chittagong Laldighi waived loans of Tk 65 crore taken by Nurjahan Super Oil, Tk 206 crore of Kaleq and Sons, Tk 92 crore of Muhib Steel Industries, Tk 75 crore of Chittagong Ispat, Tk 74 crore of Rubayet vegetable oils and Tk 1.5 crore of Imam Motors in the last two years.
During the same period, Agrani Bank’s Agrabad branch erased Tk 306 crore of Marrin Vegetable Oils, Tk 50 crore of MM Vegetable, and its Asadganj branch wrote-off Tk 86 crore of Jasmir Vegetable, Tk 59 crore of Mizan Traders.
Nurjahan Group could get its loan of Tk 691 crore, borrowed from Agrani’s New Market branch, written off.
Sonali’s Chittagong Agrabad branch erased loans of Tk 348 crore it had given to eight entities including Jasmir Vegetable Oil, Imam Group, Mohiuddin Corporation, AK Enterprise and Kamal Enterprise.
The central bank officials said that most of the business entities used fake address and qualified for loans in violation of rules. They suspected that the influential quarters with the help of corrupt bank officials were behind the show of loan write-off spree.
Centre for policy dialogue executive director Mustafizur Rahman observed that the government should admit the disastrous condition of the banking sector without further delay.
A commission should be appointed immediately to assess the actual position of the banks for remedies, he said.