Sometimes statistics scream with a message that words fail to din into ears! The case in point is the financial sector coming under increasing strains of non-performing loans (NPL) much of which is perhaps destined to be written off. The default culture with its defiant dimension of taking fresh loans on the back of a deliberately derailed loan and mobile banking sans a legal framework go far beyond a polite categorisation of 'financial indiscipline.' They amount to financial crime --plunder, loot and extortion --under the guise of a culture stewing in its juice.
A report in this paper last week stated that Non-performing loans (NPLs) in the banking sector crossed TK 800 billion mark for the first time at the end of September last. From TK 657.31 billion a year back, the classified loans soared to TK 803.07billion at the close of last September thereby accounting for an increase of 22.15 per cent on a year-on-year basis. Adding a note of caution, the Bangladesh Bank observed that since end-December,2016 when default loans had actually declined, there has been a continuous rise in every quarter scaling a new high at the end of July-September quarter.
Flooding in different parts of the country in July-September quarter might have upset recovery drives. However, a senior official of the central bank didn't think the rise in non-performing credits is 'alarming' and hoped it would come down by the year-end. Yet, we believe this is the right time to intervene for a turnaround considering that the election year is round the corner when financial discipline may go awry,
Dr Ahsan H Manzur, executive director of the Policy Research Institute of Bangladesh (PRI) flagged a concern : "Rise in non-performing loans beside slow-down in deposit growth is gradually reducing the lendable funds of the banks." Resultantly, he argued 'this would force the interest rates to shoot up in the near future and we would lose the benefit of the current lower interest rates.'
This conjures up a two-fold scenario: Private sector lending may face a squeeze and the gap between deposit and credit interest rates may widen which could not be healthy.
Habitual defaulters take added advantage of 'the weakness of the banking sector.' They take fresh loans from banks 'soon after filing writs as these give them a clean slate. Some willful defaulters taking that route to show their loans as 'unclassified' to be technically, if deceitfully, entitled to fresh loans have made NPLs into a monstrous aberrant culture.
'Professional managements and quality boards, however,' set apart a few banks. By this criterion, we come to see classified loans from nine foreign banks having come down and that of development finance institutions staying almost unchanged between July and end-September,2017. In a stark contrast, the six state-owned commercial banks showed an increase in NPLs by 11.38 per cent and those of 40 private commercial banks rose by 7.0 per cent during the period under review.
Experts insist that a strong political will is highly imperative in applying a visible and effective brake on the runaway NPLs. This should be squarely reflected on strong corporate governance taking the requisite tough administrative and legal steps against habitual defaulters .
In parallel, on the occasion of the 13th anniversary of the Anti-Corruption Commission (ACC) last Tuesday, former Bangladesh Bank governor Dr. Mohammed Farashuddin pointed to a damning slippery slope through which people are fleeced of their hard-earned money. A scope of corruption has emerged in the mobile banking sector operating without any regularity framework to protect the users' interest. The service providers are 'plundering' the account holders by charging 2.0 per cent against every money transfer while banks charge only 0.5 per cent, Dr. Farashuddin hitting the nail on its head revealed the cracks in the system.