The amount of defaulted loans in the county’s banking sector rose by Tk 10,167.08 crore in the first three months of 2022 after the regulatory exemptions for loans expired in December 2021.
The borrowers enjoyed the relaxed repayment scope for 2020 and 2021, including a one-year loan moratorium, following the Covid outbreak.
With the increase in the January-March quarter, the amount of defaulted loans in the banking sector rose to Tk 1,13,440 crore at the end of March 2022 from Tk 1,03,273.78 crore three months ago.
In 2021, the amount of defaulted loans increased by Tk 14,990 crore from Tk 88,283 crore at the end of December 2020, though banks were barred from downgrading loans against repayment of only 15 per cent of the overdue loans.
Of the defaulted loans, the amount defaulted in private commercial banks went up to Tk 57,803.68 crore at the end of March 2022 from Tk 51,520.82 crore three months ago.
The volume of such loans in state-owned commercial bank rose to Tk 48,737.03 crore from Tk 44,976.84 crore.
The amount of defaulted loans in foreign commercial banks and specialised banks stood at Tk 2,884.58 crore and Tk 4,015.56 crore respectively.
About the surge in defaulted loans, Policy Research Institute executive director Ahsan H Mansur on Sunday said, ‘As the regulatory relaxations are ending gradually, defaulted loans have started to bounce back again and it was supposed to happen.’
Besides the regulatory forbearance, the deterioration in the country’s economic situation also affected the repayment capacity of some borrowers and thereby increasing the magnitude of defaulted loans due to the combination of the two factors.
Many borrowers are still using the regulatory forbearances and many started to become defaulters against once the regulatory exemptions started expiring, said the economist.
The defaulted loans amount would eventually increase further, Mansur forecasted, citing the existing regulatory approach and the tendency of borrowers to avert repayments.
The ratio of the defaulted loans in the banking sector also rose to 8.53 per cent against the outstanding loans of Tk 13,29,735.73 crore at the end of March 2022 from 7.93 per cent against the outstanding loans of Tk 13,01,797.26 crore three months ago.
The ratio would be around 10-11 per cent and the regulator is in a kind of artificial comfort as it kept the amount at 8.53 per cent by providing regulatory forbearance, he observed.
If the written-off loans, the rescheduled loans and the loans remaining unrecovered due to court proceedings are taken into account, the amount would be around 20 per cent, he further said.
Terming the present default loan situation as alarming, Mansur apprehended that most of these loans cannot be recovered finally.
‘So what is the use of keeping those loans out of the calculation?’ he questioned.
The economist said that instead of facilitating the defaulting banks and borrowers the regulator must be stringent or else regulations would not be obeyed by the borrowers and banks.
Prior to the latest increase in the volume of defaulted loans, the amount of such loans in the banking sector dropped by Tk 6,048 crore in 2020 from Tk 94,331 crore at the end of December 2019 when all the borrowers received moratorium facility after reaching an all-time high of 11.99 per cent or Tk 1,16,288 crore of outstanding loans at the end of September 2019.
The amount dropped by Tk 28,005 crore between September 2019 and December 2020 mainly because of the regulatory forbearances, including a one-time exist facility and the loan rescheduling scope with just 2 per cent down payment.
Meanwhile, the Federation of Bangladesh Chambers of Commerce and Industry on May 31 requested the central bank to extend the loan moratorium facility till December 31, 2022.
Asked about the request, Mansur said that the discretion of providing moratorium should be vested in the banks instead of allowing a generalised scope for all the borrowers.
If any bank finds that the provision of a moratorium facility would help recover the entire loan from a particular customer, the bank can offer the scope, he said.
By including the Tk 43,270 crore written-off loans and the Tk 80,000 crore loans, the recovery of which remained stalled due to court proceedings, the total volume of defaulted loans would have hit Tk 2,36,710 crore at the end of March 2022.