Six state-owned commercial banks' nonperforming loans (NPLs) were supposed to be reduced according to the conditions of the International Monetary Fund's (IMF) loan programme to bring about positive economic stability in Bangladesh. However, the number of NPLs is actually on the rise.
A point-to-point analysis made at the end of March this year shows that the amount of defaulted loans of the banks in question stood at Tk 85,870 crore, which was around 32 per cent of their total disbursed loans. However, in the same period of the previous year, the NPL amount of these banks stood at Tk 60,643 crore.
This means that the default loan amount of the six state-owned banks in question has increased by Tk 25,227 crore in a single year.
Till March 2024, a meagre Tk 318 crore has been recovered against the defaults. As the amount of defaults exceeds the recovery, the banks in question have fallen into a capital shortfall, a deficit of Tk 35,532 crore.
The information has been obtained from the minutes of a joint meeting within the Financial Institutions Division on May 15 with the Managing Directors (MDs) and Chief Executive Officers (CEOs) of six state-owned banks [Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, and Bangladesh Development Bank (BDBL)] and Basic Bank.
Bangladesh Bank (BB) aims to reduce the NPL of state-run commercial banks to 10 per cent and private banks to below 5 per cent by June 30, 2026, as a condition of receiving a $4.7 billion loan from the IMF. BB has eased the loan write-off policy, empowering banks to speed up the process within two years instead of the previous three years.
However, the reality is different.
While speaking to The Business Post, former BB governor Salehuddin Ahmed pointed out, "There is no strong role to be played by the central bank or anyone else in regards to public sector banks.
If the IMF had insisted that they would not continue their loan programme unless defaulted loans were reduced, it might have been possible to reduce some. But they will not do that because IMF wants their programme to continue too."
According to the minutes, Sonali Bank's classified loans amounted to Tk 14,988 crore (14.84 per cent of total disbursed loans) until March 2024. In the same corresponding period of 2023, it was Tk 12,067 crore (13.57 per cent).
Until March 2024, the largest bank in the country had recovered only Tk 83 crore. However, at the same point in 2023, the recovery was Tk 567 crore. As of March 2024, Sonali Bank's capital shortfall stands at Tk 4,343 crore, which was Tk 5,636 crore at the same point in the previous year.
Sonali Bank's Managing Director and CEO Md Afzal Karim, clarified about his bank's defaulted loan in that meeting. They stated that the concerned Deputy Managing Directors (DGMs) and General Managers (GMs) at its head office are responsible for loan recovery and they are assigned.
Until March 2024, Janata Bank's classified loans amounted to Tk 30,495 crore (31 per cent of total disbursed loans). In the same period last year, it was Tk 15,005 crore (16 per cent of total disbursed loans). Until March 2024, the recovery was Tk 41.16 crore, whereas it stood at Tk 225 crore at the same point as the previous year.
As of March 2023, Janata Bank's capital shortfall stands at Tk 17,510 crore, up from Tk 10,362 crore at the same point in the previous year.
Janata Bank Managing Director and CEO Md Abdul Jabbar stated that to improve the bank's asset quality, due diligence is followed in loan disbursement to prevent new NPLs. At the branch level, each loan is reviewed and time-bound so that it is recoverable.
Until March 2024, the classified loans of Agrani Bank have been increased to Tk 20,864 crore (28 per cent of the disbursed loans), rising from Tk 14,836 crore (20 per cent of the disbursed loans) at the same point in 2023. Until March 2024, the recovered amount stood at Tk 68 crore, whereas last year, it was Tk 389 crore. The company has not provided any information on capital shortfall as of March 2024. However, the number was Tk 8,366 crore at the same point last year.
As of March 2024, the classified loans of Rupali Bank amounted to Tk 10,357 crore (21 per cent of the disbursed loans), a Tk 130 crore increase from the same point last year. The amount was 23 per cent of the disbursed loans in 2023. Until March 2024, the recovered amount has been Tk 67.04 crore, whereas it was Tk 507.39 crore in 2023. As of March 2024, the capital shortfall amount stood at Tk 5,961 crore, a decrease from Tk 6,836 crore recorded at the same point last year.
BDBL's classified loans amounted to Tk 874.98 crore (33.97 per cent of the disbursed loans) as of March 2024. At the same point last year, it stood at Tk 1062.62 crore (42.41 per cent of the disbursed loans). Until March 2024, the recovery stood at Tk 18.29 crore, which was Tk 173.90 crore at the same point last year. The capital shortfall stood at Tk 565 crore as of March 2024, which was Tk 592 crore at the same point the previous year.
Until March 2024, BASIC Bank's classified loans amounted to Tk 8,292.07 crore (63.7 per cent of the disbursed loans). In 2023, it was Tk 7,475.28 crore (57.23 per cent of the disbursed loans). The recovered amount stands at Tk 40.55 crore as of March 2024, whereas in the same period last year, it was Tk 192 crore. As of March 2024, BDBL's capital shortfall amount stands at Tk 7725 crore, up from Tk 6,585 crore recorded at the same period last year.
Basic Bank Managing Director and CEO Md Anisur Rahman pointed out in the meeting that branches are making strong efforts to recover classified loans. An independent cell has been formed to update collateral valuation, identify assets, and increase personal communication.
These steps have significantly increased recovery from classified loans through cash collection, collateral sales in order with the court, and customer communication.
Insiders say that since 2019, BB has allowed a two per cent down payment for loan rescheduling. Besides, during the COVID-19 pandemic, the central bank was given moratorium facilities, which have now stopped. Hence, nonperforming loans are increasing.
Salehuddin said, "There is no pressure on government banks if their performance is bad. As a result there is lax and no innovation among those banks' management. Another thing is, many people are not willingly repaying the loan due to the increase in loan interest rates. That is why defaults are increasing."
