Crisis deepens as default loans hit all time high

The non-performing loans (NPLs) in Bangladesh hit an all-time high after the withdrawal of a number of relaxed policies, which the central bank had introduced amid the Covid-19 pandemic in a bid to tackle the unprecedented crisis.

Latest data from the Bangladesh Bank reveal that the country’s NPLs stood at Tk 1,34,396 crore until the end of September this year, a significant year-on-year increase of 32.86 per cent. September’s figure is the highest since Bangladesh achieved independence in 1971.

Bangladesh’s bad loans stood at Tk 1,01,150 crore at the end of September of last year. The NPLs rose by Tk 9,139 crore in the last three months alone, from Tk 1,25,257 crore recorded at the end of June of this year.

The banking sector’s outstanding loans till September 2022 stood at Tk 14,36,199.82 crore, and bad loans make up 9.36 per cent of the figure, show central bank data.

Commenting on the situation, Managing Director and CEO of Mutual Trust Bank (MTB) Syed Mahbubur Rahman said, “Overall situation of the country’s economy is not so good due to skyrocketing inflation, and crisis in the foreign exchange market.

“The recovery of loans is not at a satisfactory level amid the ongoing situation as people’s purchasing power has been reduced. The declining trend of export earnings of the country had a serious impact on the banks as well.”

Echoing the same, Jamuna Bank Managing Director and CEO Mirza Elias Uddin Ahmed said, “There are more rainy days ahead as the global economy is facing big challenges due to the Russia-Ukraine war.

“The borrowers were enjoying loan moratorium facilities amid the pandemic period, but the massive facility ended in December of last year. This is why the defaulted loans have increased in recent times.”

“The borrowers are now reluctant to repay the loans because of the ongoing crisis,” he added.

At the end of September of this year, default loans at the state-run commercial banks stood at Tk 60,501.84 crore, which was 23.04 per cent of their total disbursed loans.

The amount NPLs was Tk 66,695.50 crore at the private commercial banks in the same period, which was 6.20 per cent of their disbursed loans. In the same timeframe, bad loans at the specialised banks stood at Tk 4,227.98 crore, which was 11.80 per cent of their disbursed loans.

For the foreign banks, the amount was Tk 2,970.79 crore, which was 4.77 per cent of their disbursed loans.

Addressing the matter, former managing director of Trust Bank Faruk Moinuddin said, “This is not the actual scenario of defaulted loans in the country. Banks usually hide the actual volume of their defaulted loans. If those figures get published, the scenario will become worse.

“Bankers are now unable to recover the bad loans, so the government will have to provide the sector with legal and policy support. Only the willingness of the government can help banks reduce the high amount of defaulted loans.”

Moinuddin recommended that the government should take immediate initiatives to reduce facilities currently available to defaulters.

Janata Bank recorded the highest amount of bad loans in the sector until September this year, standing at Tk 20,339 crore.