Defaulted Bank Loans: Less than 1pc hold more than half

Half of the defaulted bank loans amounting to Tk 50,942 crore is with top 300 borrowers, Finance Minister AHM Mustafa Kamal told parliament yesterday, blaming banks for not choosing borrowers wisely.

There are 1.7 lakh loan defaulters in the country, with the bad loans standing at Tk 1 lakh crore. This means, less than 1 percent, 0.17 percent to be exact, borrowers hold more than half of all bad loans.

The minister also identified the defaulters as well as the amount of the loan they took from the banking system but are not paying back.

As of April, the total outstanding loan to these 300 borrowers was Tk 70,571 crore. Of this, Tk 50,942 crore have now gone bad, the minister said.

He also placed a list of 14,617 individuals and institutions that have outstanding loans worth over Tk 5 crore each taken since 2009, when the Awami League government took office. They took a total of Tk 1,741,348 crore in loan. Of the sum, Tk 7,84,624 crore is outstanding, Tk 1,10,541 crore classified and Tk 100,183 crore defaulted.

The finance minister said some “uncontrolled” domestic and global factors had affected businesses, leading to the rise in bad loans and the number of defaulters.

Insufficient collateral against the loan, depositing the same asset to more than one bank and overvaluation of collateral assets increase the risk of loans going bad, the minister said.

But the minister expected the amount of classified loans to come down in coming months as the government offered a special long-term loan rescheduling benefit in May.

The government introduced the policy to ensure the regular cash flow in businesses and to reduce the amount of defaulted loan, the said.

Replying to a question from a lawmaker, the finance minister said the amount of total defaulted loan rose by Tk 43,210 crore between September 2015 and December 2018. During the same time, the number loan defaulters increased to 58,436.

Experts were quick to point out that publishing the list will do no good and suggested that the government take concrete action to recover the loan.

Last year, the government placed a list of 100 defaulters in parliament, said Khondker Ibrahim Khaled, a former deputy governor of Bangladesh Bank.

But those defaulters have not faced any action yet, he added.

“The finance minister may reveal another list of defaulters next year. At the time, he should also place report as to whether any punitive measure has been taken against the defaulters,” he said.

Also, the list of 300 defaulters does not depict the real picture of the banking sector, he noted.

“The finance minister has not revealed the names of some influential persons who secured stay orders from the High Court on their defaulter status. A large amount of loans is with them,” he said, adding that the government should publish their names too.

According to Ahsan H Mansur, executive director of the Policy Research Institute, publishing the list would not change things much.

“There might be a psychological impact on the defaulters, but it will not help recover the defaulted loans,” he said.

The parliament should give a clear directive on how to realise the money, said Mansur, also a former economist at the International Monetary Fund.

“Assets of the habitual defaulters should be confiscated and the defaulters should be sent to jail. They should also be declared ineligible for rescheduling their loans as is the practice in developed countries,” he added.

The list placed in parliament includes names of some widely discussed loan scammers like Crescent Leather Products Ltd and Hall-Mark Fashion whose defaulted loans amount to Tk 341 crore.

Bismilah Towels Limited, which is also a major defaulter, has a bad loan worth Tk 244crore. Rupayan Housing Estate is among the top 50 defaulters. Its total loan is Tk 2,108 crore, of which Tk 280 crore is defaulted loan.

State-run Bangladesh Sugar and Food Industries Corporation is also among the top 50 defaulters. Its total loan stands at Tk 2,887 crore, with Tk 352 crore classified as bad loan.

In the last three years alone, 60,000 borrowers were added to the list of loan defaulters.

In December 2018, the total bad loans stood at Tk 1,02,315 crore, up from Tk 59,105 in September 2015, the finance minister said.

During the same time, the number of loan defaulters soared to 1,70,390 from 1,11,954.

Six companies of S Alam Group have taken Tk 15,018 crore in loan from various banks. The companies are S Alam Super Edible Oil, S Alam Vegetable Oil, S Alam Refined Sugar Industries, S Alam Cold Roll Steel, S Alam Trade Co Pvt Limited and S Alam and Company.

Three companies of Beximco Group -- Beximco Limited, Beximco Pharma and Beximco LPG -- have taken Tk 7,802 crore in loan.