Published:  12:32 AM, 12 January 2019

Loan defaulting and new finance minister


We welcome Finance Minister AHM Mustafa Kamal's stance on the issue of bank loan defaulting, a problem that has led the entire banking sector to almost a dying situation. Minister Kamal, soon after taking the charge of the finance ministry, has announced that the bank loan default figure will not increase 'by a single taka'. He has also called upon the authorities concerned to come up with effective steps to bring down the amount of already defaulted loans. 

The minister also said that he would make a report for the new government so that it could tackle the issue. Against such a backdrop that the country's banking sector, has been plunged into serious crises, and that also for quite a long period, but apparently there is no sign of improvement in sight, the new finance minister's assurance gives us some hope.

Among the various unsavory situations that banks confronts at different times shortage of liquidity due to soaring amounts of non-performing or defaulted loans have almost crippled the country's banks, particularly the state-owned ones. Disturbingly enough, the whole affair of running and keeping alive the state-owned banks in Bangladesh has become entirely dependent on capital injection from public money.

With a view to restructuring the capital base of the affected banks and rescuing them from the crisis, the government making budgetary provision allocated a whopping amount of money for the state-run banks to meet their capital shortfall in past several years.

However, this noble intent of the government has not yielded any noteworthy improvement so far. What is more, all the state-owned banks, both commercial and specialized, are struggling in the vicious cycle of bad loans. According to a report publish in this paper yesterday, the total amount of classified loans in the country's banks account for 11.45 percent of the total outstanding loans.

But what is more important to note that while the amounts of bad loans in the private and foreign banks are respectively 6.65 percent and 7 percent, the state-owned banks have 31.33 percent of their total outstanding loans defaulted.

As we have written several times before that the huge amount of non-performing loans at the state-run banks only reinstates the claim that there is a serious lack of good governance, accountability, efficiency and integrity in the banking administration of the country.

We also suggested the regulatory authorities to come up with immediate remedial actions in order to bring back discipline in the sector. It is our expectation that the firm stand that the new finance minister has taken at the very beginning of assuming office will help improve the situation.


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