Defaulted loans in the country’s banking sector surged by Tk 6,802 crore in January-March this year due to a heavy increase in such loans in private commercial banks even after the issuance of repayment exemption to borrowers for 2020.

As per the latest Bangladesh Bank data, the total defaulted loans increased to Tk 95,085 crore as of March 31, 2021 from Tk 88,283 crore as of December 31, 2020.

The defaulted loans represent 8.07 per cent of the outstanding loans of Tk 11,77,658 crore in the country’s banking system.

The private commercial banks led the increase in the defaulted loans in January-March with Tk 5,174 crore of their loans becoming toxic ones during the period. 

Asked about the reason for the surge in the defaulted loans, former interim  government adviser AB Mirza Azizul Islam expressed his frustration, stating, that the amount of toxic loans were increasing even after under-reporting.

The situation has deteriorated as the defaulters have been awarded with policy support one after another, Mirza Aziz said.

After providing a moratorium facility for 2020 amid the Covid outbreak, the central bank has granted till date a number facilities, including extension of loan installment payment term for the borrowers.

Under the facility, the borrowers get a scope to avail two-year additional time to repay their bank loans.

‘When the defaulters are provided with so many scopes to remain as regular borrowers without making payments, why would they repay their loans?’ Mirza Aziz asked.

A firm political commitment along with stringent measures against the defaulters is needed to bring down the defaulted loans, he said.

He also said that the Covid situation had been used as an excuse to facilitate the defaulters.

The BB data showed that the defaulted loans in the private commercial banks rose to Tk 45,090 crore at the end of March from Tk 39,916 crore in December 2020.

The ratio of the defaulted loans in the private banks increased to 47.42 per cent at the end of March 2021 from 45.21 per cent three months ago.

The defaulted loans in state-owned commercial banks also increased to Tk 43,450 crore as of March 31, 2021 from Tk 42,274 crore in December, 2020.

Specialised banks and foreign commercial banks saw their defaulted loans increase to Tk 4,086 crore and Tk 2,458 crore respectively at the end of March.

The total defaulted loans in the bank sector is now more than Tk 1.48 lakh crore if Tk 53,258 crore loans written off by the banks is considered.

Besides, recovery of another Tk 80,000 crore in loans has remained stalled due to court proceedings.

Policy Research Institute executive director Ahsan H Mansur told New Age that the defaulted loans had increased in January-March due to the expiry of the regulatory embargo on downgrading loans in December 2020.

He also predicted that the defaulted loans would increase further in the coming months.

Mansur, also BRAC Bank chairman, suggested that the central bank should provide policy support with a softer stance in dealing with the borrowers who would fail to repay installments regularly.

On the other hand, banks must be compelled to keep adequate provision against the defaulted loans so that their financial state can be kept strong, he said.