The rescheduling of defaulted loans in private banks increased by 84.01 per cent, to Tk 15,963 crore, in the January-September period of 2023, compared to the same period of the previous year.
This amount was Tk 8,674.95 crore in the January-September period of 2022.
Meanwhile, the total amount of rescheduling in the banking sector increased by Tk 7,299 crore, or 63.41 per cent, to Tk 18,811 crore in the January-September period of 2023, up from Tk 11,511 crore in the same period of 2022.
Sources at Bangladesh Bank (BB) confirmed the information to The Business Post on Tuesday.
According to the sources, the amount of rescheduling of the state-owned banks stood at Tk 1,433 crore in January-September 2023. It was Tk 1,916 crore in the same period of 2022.
Also, the amount of rescheduling of the defaulted loans stood for the foreign Banks at Tk 100.20 crore in the same period of 2023. It was at Tk 124.86 crore in the same period of 2022.
Regarding the issue, Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), told The Business Post, “Recently, two big groups have had the privilege to reschedule. On the other hand, the system of rescheduling is not good for the banking sector all the time.
“Influential people take loans from the banks, but they do not repay the banks. The banks have not been able to recover them yet, and history says that banks would not be able to recover the defaulted loans. So, banks have to write off the bad loans that will not come, as per banking rules and regulations.”
He also said that usually, most of the banks are not willing to write off bad loans, because if they do, then they will have to ensure the 100 per cent provision against these loans. As a result, the profits of banks will decrease, and shareholders get fewer dividends as well.
He also said that many executive directors of the banks give loans to their friends, and most of the time these loans become default.
Ahsan said, “The boards of banks have to decide which loans will be rescheduled because there are many defaulted loans that will not come back into the banks and the bank authorities know it very clearly. But they still reschedule instead of writing off.”
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said, “The overall economy is going under pressure. The garments sector can’t export products timely; as a result, some companies are facing difficulties as well.”
Talking to The Business Post, Zahid Hussain, the former lead economist of the World Bank Dhaka Office, said that there are many reasons behind the increase in rescheduling in the banking sector.
Firstly, many rescheduled due to the national election as people who were enlisted in the defaulters' list could not contend the polls. So in this period, banks rescheduled for giving them privileges, he said.
He also said that many importers could not import properly, and as a result, they defaulted and rescheduled as well. The depositors are suffering and on the other hand, the influential people are getting many benefits from the banks.
Speaking on condition of anonymity, a senior BB official said that the amount of rescheduling increased due to the rise of default loans. Banks can go for malpractice by rescheduling instead of writing off as their profits recently dropped.
On the other hand, the central bank gave many facilities through a circular for rescheduling in 2022. Taking advantage of that, many powerful people are not paying back the loans to the banks. Instead, they are abusing the rescheduling facilities, said the official.
