Kazi Zahidul Hasan :
As default loans at banks continue to grow and set to hit a record high during January-March of the current year, concerns are growing over the financial health of the commercial banks in the country.
In fact, the default loan amount, during the first quarter of current year, reached Tk 1,00,0648 crore (including written-off loans) showing the vulnerability of the major banks, especially the state-run ones.
Out of the total amount, the written-off loans were Tk 41,237 crore, according to a figure of Bangladesh Bank (BB).
‘It’s an ominous sign that the banking system is now undergoing through a very risky phase. A high level of default loan may not only harm the banks in a large extent but also leave an adverse impact on the economy,” Dr Khandoker Ibrahim Khaled, a former deputy governor of BB told The New Nation on Wednesday.
He pointed out that corruption of bank officials and aggressive lending are mainly responsible for the high level of default loan in the banking system.
“Public banks are particularly hit by the growing default loans as they were holding lion’s share of the defaulted amount. Rising default or bad loans would reduce their lending ability and it would later harm their profitability to a large extend,” said Khaled.
The former BB Deputy Governor mentioned that the financial health of public banks is deteriorating fast following recent spate of loan scandals and soaring default loans in their overall credit portfolios.
“Banks are granting loans without proper scrutiny and even the public banks have allegedly sanctioned a big amount of loan to a vested group violating banking norms. These loans are now turned into sour enlarging the amount of default loan in the banking system,” Dr Salehuddin Ahmed, former BB governor told The New Nation on Wednesday.
He observed that most banks especially public sector ones are now mired by the poor governance and oversight leading them into grave crisis. Unless good governance is restored there with deployment of efficient board members, they will not come out from the present vulnerability.
Expressing concern over the growing default loans at banks, Dr Salehuddin Ahmed said, banks should concentrate more to bring down the share of non-performing loans in total advances and recover as much as possible of the loans that were in default. Otherwise, their financial health will deteriorate fast, posing a potential threat to the country’s financial sector.
“Being the country’s banking sector regulator, BB needs to act properly and force the banks to comply with the banking norms. Besides, it should intensify banking supervision, and monitoring to prevent bad lending practices by the commercial banks. It can also help reining the growing default loans at banks,” he opined.
As default loans at banks continue to grow and set to hit a record high during January-March of the current year, concerns are growing over the financial health of the commercial banks in the country.
In fact, the default loan amount, during the first quarter of current year, reached Tk 1,00,0648 crore (including written-off loans) showing the vulnerability of the major banks, especially the state-run ones.
Out of the total amount, the written-off loans were Tk 41,237 crore, according to a figure of Bangladesh Bank (BB).
‘It’s an ominous sign that the banking system is now undergoing through a very risky phase. A high level of default loan may not only harm the banks in a large extent but also leave an adverse impact on the economy,” Dr Khandoker Ibrahim Khaled, a former deputy governor of BB told The New Nation on Wednesday.
He pointed out that corruption of bank officials and aggressive lending are mainly responsible for the high level of default loan in the banking system.
“Public banks are particularly hit by the growing default loans as they were holding lion’s share of the defaulted amount. Rising default or bad loans would reduce their lending ability and it would later harm their profitability to a large extend,” said Khaled.
The former BB Deputy Governor mentioned that the financial health of public banks is deteriorating fast following recent spate of loan scandals and soaring default loans in their overall credit portfolios.
“Banks are granting loans without proper scrutiny and even the public banks have allegedly sanctioned a big amount of loan to a vested group violating banking norms. These loans are now turned into sour enlarging the amount of default loan in the banking system,” Dr Salehuddin Ahmed, former BB governor told The New Nation on Wednesday.
He observed that most banks especially public sector ones are now mired by the poor governance and oversight leading them into grave crisis. Unless good governance is restored there with deployment of efficient board members, they will not come out from the present vulnerability.
Expressing concern over the growing default loans at banks, Dr Salehuddin Ahmed said, banks should concentrate more to bring down the share of non-performing loans in total advances and recover as much as possible of the loans that were in default. Otherwise, their financial health will deteriorate fast, posing a potential threat to the country’s financial sector.
“Being the country’s banking sector regulator, BB needs to act properly and force the banks to comply with the banking norms. Besides, it should intensify banking supervision, and monitoring to prevent bad lending practices by the commercial banks. It can also help reining the growing default loans at banks,” he opined.
