The prevailing economic crisis in Bangladesh is predominantly attributed to an immense volume of defaulted bank loans. An astonishing actual default loan amount of more than Tk4 lakh crore is concealed, exacerbating the situation.
This remark was made at a webinar organised by the Forum for Bangladesh Studies on Saturday.
The speakers at the programme recommended the establishment of a distinct tribunal dedicated to recovering funds from major defaulters.
Prof Muinul Islam, Economics Department, Chittagong University said at the webinar that the formation of the tribunal and retrieval of funds from the top defaulters is indispensable. Failure to take these actions would expose banks to the risk of being treated as family properties, leaving them unprotected.
He added, “A specific interest group, exploiting political connections and influence, deliberately acquired loans from banks and intentionally defaulted on them. Subsequently, they illicitly siphoned the money abroad, resulting in a USD crisis. This currency turmoil led to a significant 25 per cent devaluation of the Taka, ultimately culminating in the ongoing economic crisis.”
The latest amendments to the Bank Companies Act have raised concerns as they appear to favour defaulters. The most recent amendment has extended the term of board directors from 9 years to 12 years, prompting further scrutiny and debate, the former BIBM Director General said.
The Bangladesh Bank's calculation of defaulted loans is deemed inaccurate, currently standing at Tk 4 lakh crore. A significant portion of Tk 2 lakh crore remains stuck in court cases, while Tk 55,000 crore has been written-off. In total, the defaulted amount accounts for Tk 4 lakh crore in these instances, he also added.
In concurrence with his views, Mamun Rashid, the Managing Partner of PWC, said, “The International Monetary Fund (IMF) had disclosed the accurate magnitude of defaulted loans in Bangladesh in 2019. At that time, defaulted loans accounted for approximately 20 per cent of the total disbursed loan amount.”
The surge in non-performing loans (NPL) in Bangladesh is attributed to inadequate risk management practices. Furthermore, there is a noticeable scarcity of skilled personnel for effective risk assessment. Additionally, the absence of innovative products in the market is identified as another contributing factor, he added.
According to the data of Bangladesh Bank, the banking sector's defaulted loans reached Tk 1,31,620 crore by the end of the March quarter this year, constituting 8.8 per cent of the total loans. During the first quarter of 2023, the total disbursed loan amount stood at Tk 14,96,346 crore.
Former secretary of Economic Reporters’ Forum (ERF) and Prothom Alo online head Shawkat Hossain, researcher at German government's education project, Zia Hasan joined while Lecturer of Independent University Zahed Ur Rahman, moderated the session.
