Kazi Zahidul Hasan :
Banks are grappling with a vast pool of toxic loans as companies and borrowers fail to meet their pay back obligation in the wake of an adverse business climate.
This has significantly impacted on lending ability and profitability of the commercial banks, leaving a knock-on-effect on the economy, according to banking experts.
“The commercial banks are now dealing with huge amount of bad loans despite repeated large loan restructuring facility offered by the central bank,” Former Bangladesh Bank Governor Dr Salehuddin Ahmed, told The New Nation on Friday.
He said aggressive lending is mainly responsible for the high level of toxic loans. This is weighing heavily on their financial health, crippling lending ability to new ventures and undermining economic growth.
“Despite central banks policies in recent years, the hangover of toxic debt is still persisting as companies and large borrowers struggle to pay off the money that they borrowed from their corresponding banks,” he noted.
Dr Salehuddin Ahmed said even the borrowers are failing to meet their periodical pack back obligation, pushing up the overall defaulted loans at the banking system
Commercial banks reported a total of Tk 63,365 crore defaulted loans in their books at the end of June 30, up from the Tk 59,411 crore three months earlier, according to central bank statistics.
Banking experts said the total defaulted lons at the commercial banks could be more if the toxic loans were accommodated in their balance sheets.
“The defaulted-loan ratio at the country’s commercial banks rose over the second quarter of 2016 as a slowing business climate has left many corporate borrowers struggling to repay old debt. This in turn pushed up banks’ soured loans and ate their profitability,” a senior executive of a public bank told The New Nation yesterday, requesting not to be named.
Defaulted loans accounted for 10.06 per cent of the total outstanding loans of commercial banks at the end of June 30, compared with the 9.92 per recorded at the end of March 31, showing 0.14 percentage points increase in such loans over three months.
In the second quarter (April-June), the default loan situation at six public banks deteriorated further rising by Tk 2,788 crore to Tk 30,077 crore.
Defaults accounts for 25.74 per cent of their total outstanding loans.
The default loans in private banks, in the second quarter, dropped by Tk 16 crore standing at Tk 25,315 crore or 5.44 per cent of their total outstanding loans.
“Banks are now under the surface of toxic loans that could sap the strength of an economy of a country like Bangladesh for years to come,” Dr Ibrahim Khaled, former BB Deputy Governor told The New Nation yesterday.
