When will this bad-culture of default loan be eliminated?

:: Dr. Kazi Ertaza Hassan ::

Bangladesh’s banking sector is grappling with a huge amount of bad loans. At the end of September last year, the bad debt stood at Tk65,731 crore but a year later, the figure has swollen to more than Tk80,307 crore, data released by the Bangladesh Bank on Tuesday showed. In the last three months alone, the amount has increased by Tk6,159 crore. Banks in Bangladesh granted loans of Tk752,730 crore until September 30 this year. Of this amount, Tk80,307.21 crore or 10.67% are bad loans, the data showed. Until June this year, the defaulted loan stood at Tk74,148 crore or 10.13% of the disbursed amount.

We think that measures should be taken immediately to rein in bad loans. Monitoring on banks should make streng to make sure of there no new default loans,” he said.  The central bank reports on bad debts every three months. But apart from that, there are default loans in the banking sector that the banks write off. This brings down bad loans to some extent. Economists, however, say the written off loans, too, are defaulted loans. Banks exclude some of the loans they had disbursed from the balance sheets if there is little or no chance of recovering them. People involved in the sector say bad debts have increased as loans are sometimes approved on political consideration and directors of the banks take loans from each other’s institutions. Default loans stood at Tk22.644 crore at the end of 2011, which was 6.12% of the total disbursed loan until then.

Central bank data show that six state-owned banks have the highest amount of default loans. By the end of September, the total bad debt of Sonali, Janata, Agrani, Rupali, Basic and BDBL stood at Tk38,517 crore. These banks had disbursed loans of Tk131,689 crore. The banks should try to bring down default loans ahead of December. Irrecoverable loans is not coming down despite the central bank’s directives to the commercial banks to increase supervision. ‘good governance” in the banking sector need to be strength.