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.
Payment failure for three months or 90 days after the due date will now lead to classification of loans regardless of type, according to new rules announced by the central bank yesterday, aligning with international best practices prescribed by the International Monetary Fund (IMF).
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.
Misgovernance, corruption, nepotism and subsequent bad debts keep plaguing our banking landscape.
The Bangladesh Bank’s policy that allows defaulters longer repayment tenures and easy terms and access to fresh funds has appeared to have failed to make major inroad in bringing down bad debts as rescheduled loans are even turning sour.
There are two major economic problems that have been plaguing Bangladesh for a long time: Rising non-performing loans (NPLs), and money getting laundered out of the country.
Finance Minister AHM Mustafa Kamal today told the parliament that as of March this year, the amount of defaulted loans in the country was Tk 126,369 crore.
State-run Janata Bank’s provisioning shortfall has hit a whopping Tk 8,256 crore, the highest-ever deficit for any bank in the country, putting depositors’ money at risk.
