In One Year, Non-Performing Loans Surge to 6 Trillion Taka

Staff Reporter

Non-performing loans are increasing yet again. By the end of September, the amount is expected to rise to approximately 6 trillion taka. The situation is most critical for four state-owned commercial banks. The Bangladesh Bank states that the actual picture is emerging, leading to an increase in the volume of non-performing loans. The central bank claims that the flight of many industrialists abroad and the closure of factories have also contributed to the rise in non-performing loans.

However, economists present a different perspective.

Professor Dr. Shamsul Huda, Chief Executive of a private institution and an economist, said that since August 5 of last year, the country’s financial sector has completely collapsed. In particular, a significant portion of those involved in the sector are engaged in politics. Due to political reasons, their arrests, the closure of their factories, obstacles in opening letters of credit (LCs), and the halt in raw material imports have rendered these institutions completely inoperative. This has caused widespread damage to the country and its economy.

He further stated that if a businessman suffers losses due to lawsuits or harassment, it does not only affect their establishment but also impacts the entire economy. Numerous industrial entrepreneurs are currently in jail, and their factories have been rendered inoperative. They are unable to resume production, so how can they repay their loans?

According to sources from the Bangladesh Bank, when the Awami League government was formed in 2009, non-performing loans amounted to 22,481 crore taka. Fifteen years later, at the beginning of the last financial year, this figure had risen to 211,391 crore taka.

During this period, the size of the economy has grown manifold, with positive developments in GDP, export earnings, and the overall economy. However, everything came to a halt after August 5 of last year. From March to June this year, non-performing loans increased by 110,094 crore taka in just three months. Over the course of one year, the amount surged by 319,036 crore taka, reaching 530,428 crore taka.

Bank officials state that forensic audits are revealing the true extent of non-performing loans. Changes in the rules for classifying loans as non-performing are also a significant factor.

Arif Hossain, a spokesperson for the Bangladesh Bank, said that the private sector has been tainted for a decade. They have destroyed their own banking sector. Some non-performing loans are shown as unclassified due to court orders, but we are now ignoring those and classifying all of them. After forensic audits, we estimate that the situation will worsen further. Therefore, we have already classified them and marked them as doubtful.

According to the latest data from the Bangladesh Bank, classified loans in four state-owned commercial banks have increased by 10 percent in just six months. By June, the amount stood at 146,362 crore taka. The official believes that irregularities in loan disbursement due to political influence are a major reason.

Arif Hossain further stated that these banks have sanctioned loans under political or other influences that should not have been approved. In some cases, loans were issued at two or three times the amount that should have been sanctioned. As a result, repayment of these loans has become impossible.