That the loan default culture has a detrimental impact on the financial health of the banking sector and also damages the overall economy of a country is a well-known assertion. But various data show that this bad culture remains very defiant in Bangladesh.
The bank authorities, in spite of taking steps, have not been able to deal with this in an effective manner. A report not long ago, referring to Bangladesh Bank data, said the classified or bad loans in the scheduled banks of the country stood at around Tk 92 billion. This amount is around 10 per cent of the total outstanding loans.
But what these data have not taken into account is the staggering amount of written-off and rescheduled loans. If that amount was included, the sum would be much higher. Although all the banks have default loans, the situation at the state-owned banks (both commercial and specialised) is particularly dire. In fact, those banks have been kept alive through capital injection from taxpayers' money.
If we take a look at the loan defaulting scene in the country we will find that the big borrowers are the big defaulters and most of them are wilful defaulters. But despite their track record of non-payment, the big borrowers manage to remain out of reach of any loan recovery operation.
Moreover, they can reschedule loans on easy terms and keep getting fresh loans through taking advantage of the existing loan disbursement policy. Besides, as the large defaulters are protected by the political system due to their closeness to the power centre, banks cannot initiate a successful recovery process.
Nevertheless, private borrowers are not the only defaulters of bank loans. In fact, the preponderance of default in the public sector itself is another marked feature of the loan dodging phenomenon. During the last few years, the central bank has taken various reform efforts and increased monitoring and inspection of the sector but those efforts have not had any notable effect on non-performing loans so far.
This posts a bad impression after all. This culture must stop as the government needs to come up with stringent actions against wilful defaulters to protect the money of the general depositors and save the economy ultimately.
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