Default loans close to Tk 1 lakh cr as borrowers struggle to repay
Default loans in the country's banking system has surged by Tk 9,430.25 crore in January-June period after the general loan moratorium facility amid the Covid outbreak expired in December 2020.
As per the latest Bangladesh Bank (BB) data, the total default loans increased to Tk 98,164.31 crore as
of June 30, 2021 from Tk 88,734.06 crore as of December 31, 2020.
The default loans as of June 30 represents 8.61 per cent of the outstanding loans of Tk 11,39,776.96 crore in the country's banking system. The amount continued to increase since the general repayment exemption and an embargo on downgrading loan status expired in December 2020.
According to the BB data, the amount of default loans rose by Tk 3,899.12 crore in April-June quarter as the total amount of default loans was Tk 94,265.19 crore as of March, 2021 when the ratio of non-performing loans was 8.48 per cent.
After the general loan moratorium for 2020 ended, the central bank again relaxed the loan classification rules in June 2021. Under the fresh relaxation, banks were asked not to downgrade any loans if the borrowers repay within August 31, 2021 only 20 per cent of the amount remained overdue till the end of June quarter.
The borrowers were asked to adjust the remaining 80 per cent of the overdue amount when the tenure of the loan instalment would expire. The BB earlier allowed repayment tenure up to two years against the existing unclassified loans based on the bank-customer relationship.
Former Bangladesh Bank governor Salehuddin Ahmed told The Daily Observer that the amount of default loans rose in the first half of this year as business and economic activities had faced negative impacts due to the second wave of the coronavirus outbreak.
Even though people have come out for work, the normalcy is yet to be restored and people are more panicked about the coronavirus in 2021 compared with 2020, he said, adding, 'As a result, all businesses - big industries as well as small and medium entrepreneurs - have suffered in terms of sales and profitability.'
Besides, businesses are in uncertainty which has prompted them to save some cash instead of making their cash flow dry by paying loan instalments, he said.
Businesses have adopted a wait-and-see approach thinking that it would not be easy for them to secure bank loans in the current situation, the former governor said.
On the other hand, bankers are not putting their efforts to recover the loans properly as the central bank has been providing facilities to the borrowers one after another, said Salehuddin.
The total defaulted loans in the banking sector is now more than Tk 1.51 lakh crore if the Tk 53,258 crore loans written off by banks is considered. Besides, recovery of another Tk 80,000 crore in loans has remained stalled due to court proceedings.
Before the coronavirus outbreak, the Bangladesh Bank in 2019 granted a loan rescheduling policy to contain the soaring volume of default loans that increased to Tk 1,16,288 crore at the end of June.