Defaulted loans shot to a record high amid experts call to cut concessions

The amount of defaulted bank loans in the country increased by about 9 per cent to a record Tk 1.25 lakh crore amid the adverse impact of the Covid-19 pandemic until June this year.

According to the Bangladesh Bank’s June quarter report, banks' loan disbursement stood at Tk 13.98 lakh crore till June 2022, of which 8.96 per cent or Tk1. 25 lakh crore turned into bad loans, reports UNB.

Despite the loan moratorium and reducing the number of annual instalments, the volume of defaulted loans has reached a record high in the country so far, said the report.

Three months ago, in the March quarter of 2022, the defaulted loans totalled Tk 1.13 lakh crore, according to the report.

Accordingly, in the second quarter of the year (April-June), the amount of loans that remained unpaid in time in the banking sector increased by Tk11,818 crore.

In the first quarter (January-March) there was an increase of defaulted repayment by Tk10167 crore to Tk 1.13 lakh crore.

Noted economist Dr. A B Mirza Azizul Islam told UNB, “If you want to reduce defaulted loans, you have to increase debt collection. At the same time, bulk moratorium and reduced number instalment facility should be stopped for the borrowers.”

He explained why. “Because, having been able to get concessions for several years, the defaulters now think that if I don't repay the loan, I will get more concessions in the future. So the facility of the defaulters should be stopped.”

Former Bangladesh Bank governor Dr. Salehuddin Ahmed echoed Island.

He said that the loan collection should be focused on the legal procedure as the banks lend money to small depositors. Without legal action the depositors' benefit would not be secured.

In reply to a query about the capital shortfall of different banks, he said that the more defaulted loans increase, the more security provision should be kept at the central bank.

Banks have run into capital shortages while keeping this extra money out, he said.

The central bank’s latest report found that the capital deficit of seven state-owned banks, including two of the specialized banks, was Tk 26095 crore at the end of June.

Out of this, Bangladesh Krishi Bank has the highest deficit of Tk 13171 crore. The second highest deficit of Tk2507 crore at the Agrani Bank, Tk 2,278 crore in Sonali Bank, Tk 2,261 crore in Rupali Bank, Tk 2,124 crore in Basic Bank, Tk 1,603 crore in Janata Bank, and Tk 2,149 crore in Rajshahi Agricultural Development Bank.

The capital shortfall of five private sector banks is Tk 3,437 crore. Among them, the deficit of the ICB Islamic Bank is Tk 1,659 crore, Tk 1,212 crore at Bangladesh Commerce Bank, Tk 300 crore at National Bank, Tk 263 at Padma Bank, and Tk 23 crore at Bengal Commercial Bank.

At the end of June 2022, the total capital deficit of 12 banks stood at Tk 29531crore in the banking system, said the report.