'Defaulted loans escalated because potential clients were denied'

 
Financial Institutions Division (FID) Secretary Sheikh Mohammad Salim Ullah has said that defaulted loans in the banks of Bangladesh have escalated because potential clients were not allowed to take loans from banks while loans were distributed to incapable borrowers. He laid emphasis on conducting firm surveillance on the loan distribution process.

Sheikh Mohammad Salim Ullah made the above remarks on Wednesday at the inaugural program of monthly profit savings scheme at the corporate office of Agrani Bank Limited as the chief guest.

Most of the banks in Bangladesh have been suffering from mammoth loads of defaulted loans. On top of that massive sums of defaulted loans are being rescheduled on a regular basis which further worsens the plight of the banking sector. Rescheduling bank loans happened only in state-owned banks during 2012 but later on it affected private banks too. Bangladesh Bank also agrees with the idea of rescheduling bank loans. Entrepreneurs were allowed three years time during Covid 19 pandemic to pay back their loans. As a result banks are not being able to recover defaulted loans from their clients. 

Bangladesh Bank's information shows that bank loans of around 26 thousand crore taka were rescheduled during 2020 and 2021. During the same period loan interest of approximately 3.5 thousand crore taka was waived. Huge sums of defaulted loans were also written off in previous years. Financial sources have informed that the magnitude of defaulted loans has crossed 2 trillion taka including written off debts. Banks usually write off loans when reserving 100% security deposit (provision) becomes impossible. However, official figures show that the amount of defaulted loans stood at 1 lakh 3l thousand 274 crore taka till December 2021.

State-owned banks wrote off 17 thousand 219 crore taka from January to September 2021. 41 private banks wrote off 24 thousand 953 crore 50 lakh taka during the same period. During the same time 9 foreign banks wrote off 1 thousand 71 crore taka and 3 specialized banks wrote off 365 crore taka. Financial experts have commented that these amounts have very little likelihood to be paid back.

Besides defaulted loans, money laundering also has been going up and up. Money laundering from Bangladesh to foreign countries has increased on an unnaturally egregious scale, financial sources have informed. Reportedly 4 lakh 36 thousand crore taka have been illegally transferred from Bangladesh to overseas locations during last six years. On an average every year nearly 73 thousand crore taka is being laundered from Bangladesh to foreign destinations.

Bangladesh is now facing a trade deficit of 9.09 billion dollars which is the highest in the country's history.
Money laundering is one of the major reasons behind the burgeoning trade deficit in the country. Economists have stated that most of the defaulted loans might have been laundered abroad by fraudsters.

The program was presided over by Agrani Bank Limited's Managing Director and Chief Executive Officer (CEO) Murshedul Kabir. Agrani Bank Limited's Chairman Dr. Zaid Bakht also spoke on the occasion as a special guest.