Bangladesh Bank has issued strict instructions to the top executives of commercial banks to curb the persistent rise in loan defaults. Despite offering multiple facilities such as loan restructuring, rescheduling and special repayment arrangements, the regulator has questioned why the volume of defaulted loans continues to grow. Banks have been asked to bring down defaults significantly within the current month.
During Sunday’s bankers’ meeting, attended by managing directors and chief executives of all banks, the governor Ahsan H. Mansur and all deputy governors expressed concern over the rapid jump in defaulted loans following the fall of the previous government. Mismanagement, corruption, absconding businessmen and even reputable entrepreneurs becoming defaulters have worsened the situation. The stricter loan policy implemented earlier has also contributed to the surge.
The meeting also expressed dissatisfaction over the slowdown of credit growth in the agriculture and SME sectors, advising banks to increase disbursement in these areas. Two managing directors of private banks told a national newspaper that previously, even minor irregularities were enough for loans to be classified as defaulted. Now the central bank has noted that the growing burden of defaults is attracting negative remarks from global institutions and reducing banks’ lending capacity.
According to data presented, loans of Tk 50 crore and above amount to Tk 10 lakh 52 thousand crore, representing 62.59 per cent of total bank credit. Seventy-seven per cent of total non-performing loans belong to large borrowers. Against these large loans, mortgage-backed collateral stands at only Tk 2 lakh 85 thousand 197 crore—just 27.11 per cent of the outstanding portfolio.
Between April and June, banks filed 14,652 lawsuits to recover nearly Tk 97 thousand crore in defaulted loans. Currently, Tk 4 lakh 7 thousand 435 crore remains stuck in litigation. The number of cases in money loan courts has reached 2,22,341.
A separate report on special loan rescheduling facilities showed that 1,516 applications were submitted involving Tk 1 lakh 96 thousand 47 crore. The top 20 business groups alone sought rescheduling of over Tk 1 lakh 10 thousand crore. The central bank has already disposed of 900 applications from 300 entrepreneurs, rescheduling Tk 26,114 crore and reducing defaults by Tk 13,747 crore.
AJ