Up to the end of March 2022, loans of 13 lakh 29 thousand 735 crore taka were distributed by the banking sector of Bangladesh. Out of this amount, 1 lakh 13 thousand 440 crore taka has become defaulted loans which is 8.53% of the total disbursed credits. However, unofficial sources have reported that there are defaulted loans of around 2 trillion taka including written off debts. Such high figures of defaulted loans have put the country’s banking arena in a hopeless plight.

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 condition 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. Now the pandemic situation has much improved but still 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.

Trade deficit in Bangladesh has reached 27.57 billion dollars within ten months of the current fiscal year (July to April).

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.

Former adviser to caretaker government Dr. Wahid Uddin Mahmud said, “The authorities concerned should work hard to constitute good governance and accountability in the banking sector. At the same time it is essential to keep banks away from political influence.”

President of Bangladesh Economics Association Professor Dr. Abul Barkat said, “The central bank and other regulatory institutions should carry out firm and uncompromising drive to recover defaulted loans to sustain the country’s banking sector.”

Professor Anu Muhammad of Jahangirnagar University said, “Bangladesh’s banking sector has gone into the clutches of financial perpetrators. Some of them are so powerful that the regulators cannot take any action against them.”

Dr. Zahid Hussain, former lead economist of World Bank, Dhaka Office said, “The regulatory authorities should not compromise with any bank or financial institution in case of graft and anomalies.”

by Nasir Uddin Shah in Daily Asian Age, June 6, 2022

https://dailyasianage.com/news/287527/defaulted-loans-put-banking-sector-in-hopeless-plight