Twenty-one banks managed to keep their bad loan ratios under 5 percent of their total lending, even amid turbulence last year that rattled the sector and eventually pushed up the industry average of bad loans to 16.8 percent.
Just ten banks, both state-owned and private, account for 71 percent of all non-performing loans (NPLs) in the country’s banking sector.
Central bank must strive to improve banking sector’s health
Bad loans in Bangladesh’s banking sector hit a record Tk 420,335 crore at the end of March as a clearer picture of the toxic loan is coming to light following the political changeover in August last year.
At the end of last year, defaulted loans in the banking sector stood at Tk 345,765 crore, with those state-run and private commercial banks holding the majority.
At the end of 2024, one-fifth of the total loans in the banking sector turned sour, mainly as the true extent of embezzlement by willful defaulters is now coming to light.
Defaulted loans at the country’s non-bank financial institutions (NBFIs) reached a record 36 percent of all loans disbursed by them as of September 2024, a level that sector people described as a reflection of “massive irregularities and scams” seven to eight years ago.
Defaulted loans at six private commercial banks nearly tripled in one year till September 2024, according to central bank data, which bankers term “alarming”.
The state itself had deepened inequality as it “sponsored dis-equalising factors”, exempting corporations from taxes and helping banks with liquidity for years on end only to benefit the elite, said Prof Rehman Sobhan, chairman of the Centre for Policy Dialogue, yesterday.
When most non-bank financial institutions (NBFIs) in Bangladesh are in hot water with high ratios of non-performing loan (NPL), a handful have been successfully able to keep the rate low.
Awami League-affiliated businesses had already put the country’s banking sector in trouble with huge bad debts, but the loans disbursed through irregularities to these companies turned sour even at a more alarming pace after the party’s ouster.
Twelve non-bank financial institutions (NBFIs) out of a total 35 are holding nearly 73.5 percent of the sector’s bad loans, according to Bangladesh Bank data, reflecting a precarious situation at those entities.
Sixteen non-bank financial institutions (NBFIs) faced a combined provision shortfall of Tk 1,954 crore till June this year, reflecting that their financial health had worsened.
Non-bank financial institutions (NBFIs) in the past fiscal year saw their defaulted loans reach a record 33.15 percent of all disbursed loans, according to the central bank, indicating a fragile situation in the sector thanks to widespread loan irregularities and scams.
The amount of bad loans has been spiralling in Bangladesh owing to rampant politically-motivated lending and inadequate credit risk management, according to a World Bank report.
Four state-run banks in Bangladesh are finding it difficult to recoup loans from their top 20 defaulters, a failure that has worsened their financial health and squeezed their capacity further to lend.
Default loans in the banking sector of Bangladesh hit an all-time high of Tk 182,295 crore, but no reform programme to reduce it has been announced in the budget for the upcoming fiscal year.
Bad loans rose by Tk 36,367 crore in just three months
The Bangladesh Bank yesterday unveiled its roadmap for reining in the runaway defaulted loans to a reasonable level and bringing in good governance to the banking sector, which is progressively becoming an Achilles heel of the economy.
