They take full advantage of relaxed loan reschedule policy

Four state-owned commercial banks have reduced their non-performing loans (NPL) by 35% in the year 2013, taking advantage of the relaxed loan rescheduling opportunities extended by Bangladesh Bank. 

The four state-owned banks have rescheduled the loans worth Tk5,768 crore at the fag end of the just concluded year.

Bangladesh Bank had relaxed the loan rescheduling rules in December 2013 to facilitate the businessmen affected by political unrest and help the banks to reduce their NPL rates in their balance sheets.

The total NPL of the state-owned commercial banks reduced by Tk8,866 crore to Tk16,616 crore in last year from Tk25,482 crore in 2012.

The defaulted loans of the banks basically decreased due to the huge amount of loan rescheduling, according to a Bangladesh Bank report.

Sonali Bank rescheduled Tk1,746crore in 2013 as compared to Tk453 crore in 2012 while Janata Bank rescheduled Tk1,109 crore as compared to Tk106 crore, Agrani Bank Tk854 crore as compared toTk166 crore and Rupali Bank Tk2,059 crore as compared to Tk601 crore.

The classified loans of the banks have, however, been reduced due to the given rescheduling facilities. But it is a simple accounting concept, not a theoretical one, former Bangladesh Bank Governor Dr Salehuddin Ahmed told the Dhaka Tribune.

“Banks can provide loan rescheduling facilities to the really affected businessmen considering their conditions, but if the facility remains open for all, the incentive would be misused by the corrupt people in the banking sector.’’

Dr Ahmed termed the loan rescheduling decision an irrational one as it is nothing but just to recapitalise the state-owned banks, which are already indulged in corruption, from the public money.

Not only the country’s financial sector, but also the overall economy has already witnessed a setback in absence of accountability and transparency in this sector, he said.

Ending a long continued up trend in default loans, the country’s banking sector witnessed a substantial fall in non-performing loans (NPL) by around 4% or Tk16,137 in the last quarter (October-December) from the previous quarter of 2013, because of the relaxed rules on loan rescheduling offered by the central bank.  

Bangladesh Bank alsoitself skeptical about recovering loans from the rescheduled accounts as a result it took decision on February 19 to strictly monitor the loan accounts rescheduled under a relaxed policy given on excuse that business was affected by the prolonged political unrest.

“We had relaxed the rules due to the political unrest and banks were also relieved of the NPL burden by taking advantage of the relaxed rules,” Deputy Governor SK Sur Chowdhurysaid, but warned the central bank would monitor the loan accounts to see whether those were following the terms and conditions of the relaxed rules.

Banks will have to ensure that the installments of the accounts are being paid in accordance with the terms and conditions, he said.

According to the report, maintained provision of some banks became excess then the required provision in the balance sheet of last year mainly due to massive deduction of NPL amount.