Bad loans, the worst category of defaulted loans, in the banking sector increased by 23.47 per cent to Tk 39,413.53 crore in the first six months of this year due to scheduled banks’ failure in recovering classified loans amid dull business.
According to the latest Bangladesh Bank data, the bad loans increased to Tk 39,413.53 crore as of June 30, 2014 from Tk 31,920.24 crore as of December 31, 2013. The total bad loans in banks were Tk 37,621.63 crore as of June 30, 2013.
As of June 30, 2014, the bad loans accounted for 76.76 per cent of the total defaulted loans of Tk 51,344.63 crore in the banking sector.
The BB data showed that defaulted loans in the banking sector increased by Tk 10,761.62 crore in the first six months of this year as many of the loan defaulters who were allowed to reschedule their loans on the ground of pre-polls 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 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 more than Tk 15,000 crore by taking the central bank relaxed rescheduling facility.
But, a number of businessmen failed to pay instalments against their rescheduled loans to the banks concerned that increased the defaulted loans in the January-June period of this year, 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.
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 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 first half of 2014.
In the banks, bad loans stood at Tk 16,647.50 crore or 42.23 per cent of such loans in the banking industry.
Bad loans in the private commercial banks stood at Tk 14,201.88 crore, Tk 1,208.81 crore in the foreign commercial banks and Tk 7,355.33 crore in the state-run specialised banks as of June 30, 2014.
-With New Age input
