Scandal-hit BASIC Bank accounts for two-thirds of the increase

Banks' total default loans rose Tk 3,183 crore in the three months from March 31, with the scam-hit BASIC Bank accounting for almost 64 percent of the rise.

On June 30, the banking sector's total default loans stood at Tk 51,345 crore, up 6.59 percent from the first quarter, according to data from the central bank. The amount is 10.75 percent of the total outstanding loans.

The state-run BASIC Bank alone accounted for Tk 2,034 crore of the default loans, which is 40.77 percent of its total outstanding loans. Only ICB Islami Bank has a higher percentage of default loans.

Of the 47 scheduled banks (excluding the nine new banks), 23 banks saw their default loans ascend and 24 descend.

The four state-owned commercial banks' default loans soared Tk 1,030 crore between the months of April and June, with Agrani alone accounting for Tk 571 crore.

The default loans of private commercial banks rose Tk 632 crore, with just two banks responsible for 80 percent of the sum. Foreign banks' saw their default loans increase Tk 196 crore.

Meanwhile, the default loans of three specialised banks -- Krishi Bank, Rajshahi Krishi Unnayan Bank and Bangladesh Development Bank -- dropped.

Anis A Khan, managing director of Mutual Trust Bank, said the reason for the increase in default loans is that Bangladesh Bank allowed special rescheduling facility as a result of political instability last December, which many failed to repay later and have now become default loans.

From December last year to March this year, the banks regularised Tk 14,765 crore via the facility, according to BB.

Nurul Amin, managing director of Meghna Bank, echoed Khan, adding that many banks extended the facility to even their default borrowers to improve their balance sheets.

Many banks showed their bad loans as good ones so that their balance sheets look better and more profits can be given to the owners of banks.

Later, BB inspections detected these irregularities and the loans were classified again. Another reason behind the increase in default loans is that in 2012 and 2013 many loans were given through fraud, which are now gradually becoming defaults, Amin said.

Though the political situation is calm now, an uncertainty still looms large, due to which business has not yet picked up. As a result, many businessmen are unable to repay their loans on time, which also increases the amount of classified loans, the Meghna Bank MD added.

Zaid Bakht, a director of Sonali Bank, said the state-run commercial bank is being very meticulous before sanctioning loans. Subsequently, the loans given out in recent times are not defaulting; the loans which were disbursed before are to blame for the rise in default figures.

Another reason for the rise in default loans of state-owned banks is the jute sector, said Bakht, also the research director of Bangladesh Institute of Development Studies.