AS per Bangladesh Bank figure and reported in an English daily on Wednesday, banks and financial institutions disbursed Tk 53,984 crore industrial loan during the last fiscal 2014-15 and many fear that much of the loans sanctions ‘indiscriminately’ may end up in bad loans meaning uncertainty to recover it. Such industrial loan in the previous year was slightly less but the rising trend appears mismatching with the investment situation in the ground. The economy is facing growing stagnation meaning low investment and what many observers fear is that part of the money disbursed as industrial credit may have ended up in capital flight as Washington based Global Financial Integrity (GFI) report early this month suggests.
The huge disbursement of industrial loan appears to be highly risky at a time when the volume of non-performing loans from banks and non-banks financial institutions stood at Tk 20,302.39 crore in the first quarter (July-September) of the current fiscal 2015-16. It was slightly less in 2014-15 showing that recovery of loans is only faltering instead of improving by plugging the loopholes. The defaulted industrial loan in July-September period is at 9.10 percent with soaring outstanding credit in the industrial sector.
Industrial loan default problems have devastating effect on the liquidity and solvency of banks and development financial institutions with severe setback to industrial growth. The ratio of non-performing loans is much higher in Bangladesh than the international average. It was around 12.79 percent of total loans as of September of this year while the internationally accepted tolerable limit is 2-3 percent. Moreover, the rising volume of non-recoverable loans is creating liquidity crisis at banks and financial institutions in one hand and the mandatory bigger provisioning against such loss is making lending rates higher on the other. And this in turn is slowing down investment while encouraging capital flight for reinvestment in business abroad.
We do not believe that banks to sanction loans indiscriminately. When it comes to honest borrowers banks are more than tough. Without other considerations, political or otherwise taking loan may mean losing everything. Banks are losing relevance to be helpful for economic considerations. Despite all the plunderings and corruption banks have accumulated huge money by extorting the helpless ones, ruining some borrowers hopelessly.
What is most worrying is the stability of the country’s banking sector and safety of depositors’ money in banks. In our view the Bangladesh Bank and the banking sector in particular must learn to play the role of genuine banker by being helpful to genuine new investors. Our banking system has been helpful to the monopoly of big investors. In many cases such monopoly cannot be touched for the fear of the impact it will have politically and economically. They are given more money to hide the truth,
Our banks are generally speaking for big borrowers for big considerations Those who have big borrowing have little difficulty in going on getting loans. When it becomes too difficult to conceal irregularities the disaster happens. So any change of government will reveal many horrific pictures and many villains.
