Default bank loans surge to record 1.25 trillion

The amount of defaulted bank loans in the country increased by about 9.0 per cent to a record Tk 1.25 trillion amid the adverse impact of the Covid-19 pandemic until June this year.

According to the Bangladesh Bank’s June quarter report, banks' loan disbursement stood at Tk 13.98 trillion till June 2022, of which 8.96 per cent or Tk 1.25 trillion turned into bad loans, reports UNB.

Despite the loan moratorium and reducing the number of annual instalments, the volume of defaulted loans has reached a record high in the country so far, said the report.

Three months ago, in the March quarter of 2022, the defaulted loans totalled Tk 1.13 trillion, according to the report.

Accordingly, in the second quarter of the year (April-June), the amount of loans that remained unpaid in time in the banking sector increased by Tk 0.11 trillion.

In the first quarter (January-March) there was an increase of defaulted repayment by Tk 0.10 trillion to Tk 1.13 trillion.

Noted economist, Dr. A B Mirza Azizul Islam said, “If you want to reduce defaulted loans, you have to increase debt collection. At the same time, bulk moratorium and reduced number instalment facility should be stopped for the borrowers.”

He explained why. “Because, having been able to get concessions for several years, the defaulters now think that if I don't repay the loan, I will get more concessions in the future. So, the facility of the defaulters should be stopped.”

Former Bangladesh Bank governor Dr. Salehuddin Ahmed echoed Island.

He said that the loan collection should be focused on the legal procedure as the banks lend money to small depositors. Without legal action, the depositors' benefit would not be secured.

In reply to a query about the capital shortfall of different banks, he said that the more defaulted loans increase, the more security provision should be kept at the central bank.

Banks have run into capital shortages while keeping this extra money out, he said.

The central bank’s latest report found that the capital deficit of seven state-owned banks, including two of the specialized banks, was Tk 0.26 trillion at the end of June.

Out of this, Bangladesh Krishi Bank has the highest deficit of Tk 0.13 trillion. The second highest deficit of Tk 25.07 billion at the Agrani Bank, Tk 22.78 billion in Sonali Bank, Tk 22.61 billion in Rupali Bank, Tk 21.24 billion in Basic Bank, Tk 16.03 billion in Janata Bank, and Tk 21.49 billion in Rajshahi Agricultural Development Bank.

The capital shortfall of five private sector banks is Tk 34.37 billion. Among them, the deficit of the ICB Islamic Bank is Tk 16.59 billion, Tk 12.12 billion at Bangladesh Commerce Bank, Tk 3.0 billion at National Bank, Tk 2.63 billion at Padma Bank, and Tk 230 million at Bengal Commercial Bank. 

At the end of June 2022, the total capital deficit of 12 banks stood at Tk 0.29 trillion in the banking system, said the report.