INTERNATIONAL Monetary Fund has revealed fragile condition of country’s banking sector that was remained hiding in the government estimated bad loans. At the end of June, the banking sector’s total defaulted loans stood at Tk 112,425 crore, which is 11.69 percent of the total outstanding loans. As of January 10, Tk 79,242 crore with 675 large borrowers reported as defaulters by the Credit Information Bureau has obtained a stay order from the High Court, resulting in no longer appear in the CIB database.
Those classified categories loan should be mentioned as the defaulted loan. A large number of the Special Mention loans are rescheduled or restructured many times to mask the problem loans. As of June, loans amounting to Tk 27,192.17 crore are held in Special Mention accounts, according to BB data. In the first six months of this year, loans of Tk 21,308 crore were rescheduled. Subsequently, the computation of problem assets should also include stay orders, Special Mention loans, and rescheduled loans. Accordingly, the total amount of problem assets in Bangladesh’s banking sector as of June stands at Tk 240,167.17 crore, which is more than double the reported amount of defaulted loans.
Drastically, the IMF said a large number of defaults were by choice and not due to any unexpected financial hardship. There seems to be a deep-seated pattern of non-payment of loans by certain segments of the population. Well-connected and rich businessmen have understood clearly that “there is no palette to enforce repayment of their loans”. Influential borrowers became defaulters because they can tackle the situation and these borrowers entertain expectations, based on experience.
The government if wish to cure the banking sector they must adopt some appropriate measures, including establishing corporate governance in the sector, withdraw the backup to loan defaulters and take independent decision out of the clutch of defaulters’ influence.
