Commercial banks have a serious problem with non-performing loans. During the first nine months of the current year loan defaults, according to Bangladesh Bank, increased by Tk181.35 billion. Cumulative loan defaults stood at Tk803.07 billion. If the written-off amount of Tk450.00 billion is added to this, the actual loan default stood at TK1253.07 billion. Shares of banks recorded fall in the stock market because of media reports on loan default.
IMF is worried about increasing loan default in Bangladesh. IMF has emphasized the need for greater supervision and monitoring of bank transactions. Loan default will continue to rise unless discipline and good governance are introduced in the banking sector.
The foundation of commercial banks is weakening because of increasing loan defaults. Mismanagement and risky loans are leading to loan default. This is a bad omen for the economic system.
Bank directors are taking loans from their own banks as well as from other banks. Directors of 19 banks have taken loans of Tk 4.00 billionfrom their own banks. Directors of nine banks have given loans of Tk 2.31 billion against their personal gurantee.
There is lack of good governance and accountability in the banking sector. Plenty of loans have been rescheduled and these loans are again defaulting.
The new banks started operation in 2013. Among these banks, Farmers Bank had the highest default, Tk3.78 billion, at the end of September, 20 17. Financial situation of this bank is deteriorating fast. On the one hand, loans are not being repaid and on the other, sufficient deposits are not coming. The bank is not in a position to return the money of the depositors. NRB Commercial Bank is second in respect of loan default. Their default amount is Tk1.94 billion. Meghna Bank is third in the list of defaulters. Their default loan amounts toTk1.52 billion. Midland Bank has a default of Tk460 million. South Bangla Agricultural Bank's default is Tk150 million and Modumati Bank has a default of Tk14 million.
The writer is an economist and columnist.
jamaluddinsyed23@yahoo.com.au