Published:  04:02 AM, 12 September 2018

Default loans shatter economy

Default loans shatter economy Economists have frequently blamed regulatory authorities for rising defaulted loans in the banking sector. -AA

The amount of defaulted loans in Bangladesh's banking sector has been mounting without cease. The country's economy is under the threat of utter demolition due to the augmenting figures of mishandled loans. Economists, political leaders and financial scholars have expressed grave concern over these circumstances.

The total sum of defaulted loans has amounted to 89, 340 crore taka. It has increased by 15,037 crore taka within six months. 

With written off loans added, the magnitude of defaulted loans exceed 1,44,651 crore taka. Such a voluminous amount of money which has been taken away from different banks by financial perpetrators has been driving national economy towards irreversible disservices.

Most of the state-owned and private banks have faced mammoth losses due to these defaulted loans. Banks are not being able to reduce loan interest rate because of the extensively rising sums of gobbled up loans, financial sources have informed. 

An immense portion of these defaulted credits are bad loans which have gone beyond recovery according to banking administration.

Sources close to different banks have stated that this is the official scenario of defaulted loans. The real portrait of defaulted loans is most likely to be much worse. Reportedly till December last year around 55 thousand 311 crore taka defaulted loans have been written off.

Besides, 84 thousand crore taka defaulted loans have been rescheduled. 15 thousand crore taka defaulted loans have been restructured. Allegedly directors of several banks have borrowed approximately 1 lakh 7 thousand crore taka. Most of these sums have become defaulted.

Bangladesh Bank's report shows that till 30th June this year defaulted loans have reached 89, 340 crore taka which was 74, 303 crore taka till December 2017. It shows an ominously rising trend of defaulted loans.

Bangladesh Bank's Executive Director Sirajul Islam has told media that banks should be working with serious vigilance to recover defaulted loans to rescue their own money.

Banking sources have said that a lot of influential borrowers who are also mega defaulters often get their loans rescheduled over and over again which is how they continue to breach financial regulations.

Economists have said that the directors of some banks are highly powerful and unscrupulous who do not allow the managing directors of these banks to work independently. 

Allegations show that Bangladesh Bank's regulatory role is not at all satisfactory. Most of the top defaulters exercise political power on Bangladesh Bank as a result of which Bangladesh Bank cannot initiate proper actions to regain rampaged funds.

Economic wings have reported that most of the defaulted loans have been laundered abroad by the defaulters. This is how trade deficit, liquidity crisis and financial uncertainty are crushing the economic prospects of the nation.

Bangladesh Bank prepares a report on distributed and defaulted loans every three months gathering information from state-owned, private and foreign banks. The report on the defaulted loans till June this year was approved on Monday according to reliable sources from the central bank.

The report shows that till June 2018 the outstanding amount of disbursed loans has reached 8 lakh 58 thousand 521 crore taka. It was 7 lakh 98 thousand 195 crore taka at the end of December 2017. It shows a rise of distributed loans by 60 thousand 326 crore taka within six months.

Till December last year the amount of defaulted loans was 74 thousand 303 crore taka which was 9.31% of the distributed loans of that period. At the end of June this year defaulted loans have amounted to 89, 340 crore taka which is 10.41% of the total disbursed loans.

According to Bangladesh Bank's latest report, 42 thousand 852 crore taka has become defaulted till June this year against 1 lakh 51 thousand 759 crore taka loans disbursed by six state-run banks. It is 28.24% of the full distributed loans of these six banks. It was 26.52% six months ago.

Private banks have distributed 6 lakh 48 thousand 501 crore taka till June 2018. 38 thousand 975 crore taka has become defaulted out of the total disbursed loans of the private banks during this period. It is 6.1% of the whole distributed loans of the private banks. Private banks had defaulted loans of 29 thousand 396 crore taka till December 2017.

Foreign banks paid 34 thousand 84 crore taka loans at the end of June 2018 out of which 2 thousand 171 crore taka has become defaulted. It is 6.66% of the entire distributed credits of the foreign banks. Six months ago foreign banks had defaulted loans of 2 thousand 154 crore taka.

Two specialized state-owned banks disbursed 24 thousand 176 crore taka till June this year out of which 5 thousand 241 crore taka has become defaulted. It is 21.68% of the full distributed loans of these two banks.

Bangladesh Bank's former Governor Dr. Salehuddin Ahmed has said, "Defaulted loans have been increasing due to absence of good governance in the banking system. Directors of different banks utilize political connections to take big sums of money without paying back."

Bangladesh Bank's former deputy governor Khondaker Ibrahim Khaled said to The Asian Age, "The quality of distributed loans has gone down during last ten years. Defaulted loans are increasing for this reason. 

Some directors who borrow huge sums of loans are also responsible for the continuously soaring figures of defaulted loans. Bangladesh Bank will have to conduct much stronger surveillance on all the banks to halt the malpractice of defaulted loans. Otherwise the country's economy will face irreparable damages."

Dr. Ahsan H. Mansur, Executive Director of Policy Research Institute (PRI) told The Asian Age, "Political influence and nepotism are mainly responsible for the terrible plight of the country's banking sector. Financial integrity cannot be established without ensuring the prevalence of political fairness."


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