The worst type of loans accounts for 76pc of defaulted loans
Bad loans, the worst category of defaulted loans, in the banking sector posted a 15.22-per cent growth in the first quarter of this year compared with that of a negative growth of 19.07 per cent in the last quarter of 2013 due to scheduled banks’ negligence in recovering classified loans. According to the latest Bangladesh Bank data, bad loans increased to Tk 36,778.86 crore as of March 31, 2014 from Tk 31,920.24 crore as of December 31, 2013.
Total bad loans in banks were Tk 39,445.24 crore as of September 30, 2013.
As of March 31, 2014, bad loans reached 76.34 per cent of the total defaulted loans of Tk 48,172.16 crore in the banking sector.
The BB data showed that defaulted loans in the banking sector increased by Tk 7,589.15 crore in the first three months of this year as many of the loan defaulters who were allowed to reschedule their loans on the ground of pre-poll political unrest became defaulters again.
A BB official told New Age on Thursday that most of the scheduled banks had misused the central bank’s relaxed loan rescheduling policy that resulted in the surge in defaulted loans and it also pushed up the bad loans in the first quarter of 2014.
The BB on December 23 last year relaxed rescheduling policy for six months for all kinds of loans of the businesses who had suffered losses due to the political unrest.
Under the relaxed policy, scheduled banks between December 23, 2013 and March 20, 2014 regularised loans worth Tk 14,765 crore taken by the unrest-hit businesses.
But, a number of businessmen failed to pay instalments against their rescheduled loans to the banks concerned that increased the defaulted loans in January-March, the BB official said.
He said the huge amount of bad loans would put an adverse impact on the banks’ net profits at the end of this year as they (banks) would have to keep 100 per cent provision against the loans, he said.
The businesspeople are now frequently failing to repay instalments against their loans amid dull business situation due to the political uncertainty, another BB official said.
There are three types of classified loans — sub-standard, doubtful and bad.
As per the BB regulations, if any defaulter fails to pay instalment of any loan in three months, the loan will be considered as sub-standard loan.
Banks will have to keep 20 per cent provision against such loan up to next three months.
For a doubtful loan, the instalment default duration is between six and nine months and banks will have to keep 50 per cent provision against such loan.
If any defaulter fails to pay instalment for nine or more months, it will be classified as bad loan and banks will have to preserve 100 per cent provision against such loan.
The BB official said that a number of banks had faced losses at the end of 2013 as they held huge defaulted loans despite their rescheduling spree.
He said that the crisis in the banking industry would deepen in the months to come as the clients were now failing to repay their bank loans due to dull business situation.
Banks have to calculate their net profits after paying tax and securing provision against their regular and defaulted loans.
The four state-owned banks — Sonali, Janata, Agrani and Rupali — held the largest amount of bad loans in the banking sector at the end of first quarter of 2014.
In the banks, bad loans stood at Tk 15,924.84 crore or 43.29 per cent of such loans in the banking industry.
Bad loans in the private commercial banks stood at Tk 13,340.37 crore, in the foreign commercial banks at Tk 1,020.43 crore and in the state-run specialised banks at Tk 6,493.22 crore as of March 31, 2014.
-With New Age input
