The amount of delinquent loans in the country’s banking system increased by Tk 14,990 crore in 2021, despite regulatory forbearance.
According to Bangladesh Bank data released on Wednesday, the amount of overdue loans in banks across the country rose to Tk 1,03,274 crore at the end of December 2021 from Tk 88,284 crore a year ago.
Economists fear a further deterioration in the delinquency situation, as regulatory forbearance has caused a large volume of uncollected loans to be classified as unclassified.
If those loans go into default, the amount of defaulted loans would double, they said.
Out of this amount, delinquent loans in private commercial banks increased from Tk 11,605 crore to Tk 51,521 crore in December 2021 from Tk 39,916 crore in December 2020.
The amount of loans in default in private commercial banks represents 49.89% of total loans in default while the ratio was 45.21% a year ago.
At state-owned banks, delinquent loans increased by Tk 2,703 crore to Tk 44,977 crore in December 2021 from Tk 42,274 crore a year ago.
SCB’s delinquent loan ratio stood at 43.55% in December 2021, compared to 47.88% a year ago.
In specialized banks and foreign commercial banks, the amount of overdue loans stood at Tk 3,991 crore and Tk 2,785 crore respectively at the end of December 2021.
As part of the regulatory forbearance, banks were allowed to maintain any unclassified loan upon payment of 15% of any borrower’s outstanding loan amount for the year 2021 by January 20, 2021.
Speaking about the increase in delinquent loans under the policy relaxations, the executive director of the Bangladesh Policy Research Institute, Ahsan H Mansur, told New Age on Wednesday that more bad news could be in store. waiting.
“The situation is not good right now and it will get worse,” he said.
A large number of loans are considered regular loans despite borrowers not paying their installments, he said.
Given the situation, the central bank should focus on improving banks’ capital base so they can weather shocks like a sharp rise in non-performing loans, Mansur said.
The central bank should prevent banks from issuing dividends or force them to issue lower dividends to improve banks’ financial strength, he said.
In addition, banks should be required to maintain an additional amount of provision for the same reason, he added.
The economist advised the government to take responsibility for the loans granted under its recovery plans.
Many countries did so because part of the loans given under the packages could not be recovered, he said.
He thinks that the government should at least take responsibility for the loans given under the recovery plan to artisanal, micro, small and medium entrepreneurs, otherwise it will be difficult for the banks to cope with the situation.
“The government took credit for giving loans as part of the stimulus packages, why they won’t take responsibility,” Mansur asked.
He also finds the existing return on equity and returns on assets of banks very negligible, which hinders the strengthening of the financial base of banks.
The government, after the coronavirus epidemic, announced a one-year moratorium for the borrower in 2020.
Prior to the coronavirus-induced economic fallout, the NPL ratio in the country’s banking sector stood at 11.99% or 1,16,288 crore Tk of outstanding loans at the end of September 2019, when banks implemented a special rescheduling policy allowing defaulters to regularize their defaulted loans by repaying a meager 2 percent of their outstanding loans.
Subsequently, delinquent loans in the country’s banking sector gradually declined.
Adding canceled loans amounting to Tk 43,270 crore and loans amounting to Tk 80,000 crore, the collection of which has been blocked due to legal proceedings, the total outstanding loans reach Tk 2,26,544 crore end December 2021. Speaking on the issue of NPLs on a recent show, Policy Research Institute Vice President Sadiq Ahmed suggested that punitive measures for defaulting on payment need to be strengthened to deter individuals and bank staff from engaging in such behavior.
“Appropriate NPL stock workout for each bank should be adopted based on international best practice experience,” he said.