Bad loans soar in state banks

Posted by BankInfo on Wed, Jul 12 2017 10:45 am

The state-run banks have been struggling with piles of default loans due to administrative weakness and poor supervision on loans, bankers and financial analysts have said.  

 Finance Minister AMA Muhith recently informed Parliament that the amount of default loans in state-run banks stood at Tk 111,347 crore (Tk 1.11 trillion) till the end of April this year.

 He also disclosed the list of the country’s top 100 loan defaulters in the House.

 “We have found that the state-owned banks rescheduled loans amounting to Tk 13,000 crore in last nine years.

They didn’t take any action against the defaulters as well as the bankers involved in loan scams,” Hossain Zillur Rahaman, former adviser to a caretaker government, told the daily sun.

 Earlier this month, UK-based financial watchdog Economist Intelligence Unit (EIU) reported that limited action has been taken to punish the defaulters, improve risk management and strengthen bank management in Bangladesh.

 There are eight state-run banks in Bangladesh, including Sonali Bank, Rupali Bank, Agrani Bank, Janata Bank, Basic Bank, Bangladesh Development, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank.

 The state-run banks are suffering from poor risk management, EIU said in its report titled “Banking sector faces challenge”.

 The report also said poor risk management system contributes to a high level of non-performing loans, low profitability, large capital shortfalls and balance sheet weaknesses of the banks.

 Referring to the non-performing loans in the state-run banks, Centre for Policy Dialogue (CPD) Distinguished Fellow Professor Mustafizur Rahman pointed to  three factors behind the increasing NPLs– administrative weakness, lack of legal approach and political wishes.

 “The overall economy is moving through a challenging state. The figure of bad loans we learnt from parliament is less than the ‘real figure’ as well as the big fishes stay out of the list of the finance minister,” Prof Mustafizur Rahman told daily sun on Tuesday.

 He also observed that the widespread rescheduling of the bad loans is creating a burden for the small borrowers by pushing up the real interest rates. Between January and March this year, overall bad loans in the banking sector rose by 18 percent from the previous quarter to Tk 734.1 billion while NPLs in six state-owned banks rose by 15.1 percent quarter-on-quarter to Tk 357.2 billion.

news:daily sun/12-jul-2017
Posted in Banking, News