The amount of bad loans in the country's banking sector reached a record Tk 291,538 crore at the end of December last year, thanks to poor corporate governance in the sector.
The sum was over 20 per cent of total disbursed loan. Banks altogether disbursed Tk 1,711,402 crore loans at the end of December last, according to the Bangladesh Bank.
Besides, the amount of non-performing loan reached Tk 284,977 crore at the end of September 2024, accounting for nearly 17 per cent of total outstanding loan. That means toxic loans surged by Tk 60,788 crore just in a quarter.
The provision deficit of banks has doubled due to the rapid increase in bad loans, according to BB sources.
"Influential people and big corporate groups laundered thousands of crores of taka under shady loans from various commercial banks during the tenure of the ousted Awami League government. This massive amount of toxic loans kept under the carpet through data manipulation. It has now been exposed, causing the sharp rise in the banking sector's bad loan," a central bank official told The Daily Observer yesterday on condition of anonymity.
He added, "The possibility of recovering such loans is very low as people who took the money have already gone out of reach following the fall of Awami League government."
When asked, the central bank official said, when bad loans increase in banks, their investment capacity decrease. Banks must keep 100 per cent provision on its ban loan which also affects their net income as well as weakens the financial base. Besides, the cost of fund management of banks is also increasing due to soaring bad loans.
According to the rules, there are three stages of loan classification. After defaulting, it is identified as bad or irrecoverable loans if it is substandard for three to six months, doubtful for six to 12 months, and if it is defaulted for more than 12 months. Considering these three stages, banks have to maintain safety reserves (provisions). Of this, 20 per cent is required against substandard loans, 50 per cent against doubtful loans, and 100 per cent against bad or loss-making loans.
The BB data shows the majority of bad loans lies with the six state-owned banks. At the end of last December, bad loans in these banks increased to Tk 124,442 crore. Their bad loans amounted to Tk 77,851 crore in June last. That means non-performing loans in these six banks public banks increased by about Tk 45,591 crore in a span of six months. However, the bad loans of private banks increased comparatively more in the six months in question.
At the end of December last year, the bad loans of private banks stood at Tk 159,461 crore, which was Tk 82,301 crore in June. As a result, their bad loans increased by Tk 77,160 crore just in six months. On the other hand, the bad loans of specialized banks stood at Tk 5,100 crore during this period. In addition, foreign banks have bad loans of Tk 2,533 crore.
The BB data shows Janata Bank ranks top with Tk 62,524 crore bad loans followed by Tk 24,126 crore at Union Bank and Agrani Bank held Tk 23,940 crore bad loans.
Besides, Islami Bank Bangladesh has bad loans of Tk 20,487 crore, Sonali Bank Tk 15,195 crore, First Security Islami Bank Tk 15,180 crore, Social Islami Bank Tk 11,085 crore, Rupali Bank Tk 13,407 crore, IFIC Tk 10,736 crore, Basic Bank Tk 8,490 crore, AB Bank Tk 8,261 crore and Padma Bank Tk 4,836 crore.
Due to the increase in bad loans, the provision deficit in the banking sector has doubled in just three months. According to the report, at least 13 banks have failed to reserve provisions against defaulted loans by the end of last December. The provision deficit of these banks stood at Tk 1,09,318 crore.
At the same time, due to the provision surplus of some banks, the overall provision deficit of the banking sector stood at Tk 1,06,130 crore. In the previous quarter, i.e. at the end of September, this amount was Tk 55,378 crore. That is, the provision deficit of the banking sector has increased by Tk 50,752 crore in the span of three months.
During the period, state-owned Janata Bank ranked top with Tk 27,160 crore provision shortfall folowed by Tk 18,720 crore in National Bank and Sharia-based Islamic Bank ranked third with Tk 13,153 crore provision deficit.
Besides, provision shortfall of Social Islami Bank reached Tk 10,603 crore, it was Tk Tk 9,030 crore in Sonali Bank, Tk 8,889 crore in Agrani Bank, Tk 7,886 crore in IFIC Bank, Tk 7,022 crore in Rupali Bank Tk 5,170 crore in Basic Bank, Tk 533 crore in Commerce Bank, Tk 307 crore in Standard Bank, Tk 176 crore in Dhaka Bank and Tk 2 lakh crore in ICB Islami Bank.
