The worst type of defaulted loan stands at Tk 42,353cr
Bad loans, the worst category of the defaulted loans, in the banking sector increased by 32.68 per cent to Tk 42,352.86 crore in the first nine months of this year due to the scheduled banks’ failure in recovering classified loans amid rising financial corruption. According to the latest Bangladesh Bank data, the bad loans increased to Tk 42,352.86 crore as of September 30, 2014 from Tk 31,920.24 crore as of December 31, 2013.
The total bad loans in banks were Tk 39,445.24 crore as of September 30, 2013.
As of September 30, 2014, the bad loans accounted for 73.92 per cent of the total defaulted loans of Tk 57,290.89 crore in the banking sector.
The BB data showed that the defaulted loans in the banking sector increased by Tk 16,707.88 crore in the first nine months of this year as the central bank had recently unearthed a number of scams at different banks that fuelled the overall non-performing loans.
The BB has recently conducted a number of inspections at different banks including National Bank, Mercantile Bank and Agrani Bank and unearthed huge amount of defaulted loans.
Besides, most of the scheduled banks 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 half of 2014.
The BB on December 23, 2013 relaxed rescheduling policy for six months for all kinds of loan of the businesses who had suffered losses due to the political unrest.
Under the relaxed policy, the scheduled banks regularised loans worth more than Tk 17,000 crore by taking the central bank relaxed rescheduling facility, a 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.
The businesspeople are now frequently failing to repay instalments against their loans amid dull business situation due to 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 one.
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 keep 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 third quarter of 2014.
In the banks, the bad loans stood at Tk 16,762.20 crore or 39.57 per cent of such loans in the banking industry.
The bad loans in the private commercial banks stood at Tk 15,910.28 crore, that in the foreign commercial banks Tk 1,471.91 crore and that in the state-run specialised banks Tk 8,208.47 crore as of September 30, 2014.
-With New Age input
