Non-performing loans soared to a new high at Tk 1.34 trillion at the end of September, in what economists describe as "governance failure" in Bangladesh's banking system.
The amount is 9.36 per cent of the total outstanding loans in the banking sector.
The figure of bad loans in the banking system in the first half of the current calendar year was Tk 1.25 trillion, according to Bangladesh Bank statistics.
The statistics show that the NPL belonging to the state-owned commercial banks reached Tk 605.01 billion, which is 23.04 per cent of their total outstanding loans during the period under review while the same in the private commercial banks ballooned to Tk 666.95 billion, 6.20 per cent of their total outstanding loans.
The overall size of NPL of specialised banks was recorded at Tk 44.77 billion, 11.80 per cent of their total outstanding loans. The volume of the classified credits in the foreign banks reached Tk 29.70 billion or 4.77 per cent of their total outstanding loans.
Economists and bankers have identified poor governance in the banking sector coupled with the culture of apathy to repay borrowed money as key factors for the leaps in NPL.
"It's a complete governance failure in the banking system," says economist and former adviser of a caretaker government Dr AB Mirza Azizul Islam.
He goes on: "Many borrowers show the attitude that they need not repay the loan and face no punishment either. So, they are reluctant to repay their debts."
On many occasions, loans are often sanctioned or given based on the nexus among directors of different banks, he observed.
"It seems that there has been an unholy practice among the lenders that you (sponsors) will borrow from me and don't need to repay and I will borrow from you and you won't force me to repay," he says, indicating insider lending.
Besides, many borrowers are politically well-connected also, he adds.
Banking sources, however, attribute such rise in the bad loans to, among others, lower loan-recovery rate and prevailing turmoil in trade and economy, especially the forex-market volatility.
According to them, usually the NPL trend remains comparatively high in the first and third quarters of the calendar year.
Managing Director and Chief Executive Officer of Mutual Trust Bank Limited Syed Mahbubur Rahman blames the prevailing overall economic recession, inflationary pressure and the Covid-induced shocks as the prime factors behind the growing volume of classified credits.
Spending by people has gone up significantly in recent times because of the inflation and they refrain from buying other commodities excepting the key essentials, he points out.
"Because of the factors, the loan-rescheduling facility given to the borrowers is not working. These factors have pushed up the volume of NPL in the banking system," he told the FE.
He also said the ongoing fluctuation in the foreign currencies also caused many companies to incur losses.
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