Default loans hit record Tk 2.85 lakh crore
Default loans in Bangladesh’s banking sector have reached a staggering Tk 284,977 crore as of September 2024, marking a record high and accounting for 16.93% of total outstanding loans.
This represents a significant rise from the previous quarter's defaulted loans of Tk 211,391 crore, reflecting deepening challenges in the sector.
The total outstanding loans in the banking sector now stand at Tk 16.82 lakh crore, as per the Bangladesh Bank's latest data.
This increase underscores the worsening financial health of the sector, plagued by longstanding irregularities, mismanagement, and fraud.
The record-high amount of default loans has been attributed to the failure of loan repayments by several major business conglomerates closely linked to the Awami League government, according to industry insiders.
Additionally, banks that were recently freed from the influence of entities like S Alam Group and other powerful individuals — such as former private industry and investment adviser Salman F Rahman and former land minister Saifuzzaman Chowdhury — contributed to the increase. These banks, now operating under reconstituted boards, have begun revealing the true extent of their non-performing loans.
Default loan growth
Defaulted loans surged by Tk 73,586 crore in just three months (July-September 2023), the largest quarterly jump in 16 years.
By comparison, in 2009, when the Awami League came to power, defaulted loans were only Tk 22,480 crore. Over the past 15 years, the sector has experienced significant deterioration due to anonymous transactions, financial scams, and inadequate oversight.
Sector breakdown
State-owned Banks: Default loans amount to Tk 126,111 crore, or 40.35% of total disbursements.
Private Banks: Default loans total Tk 149,806 crore, accounting for 11.88% of disbursed loans.
Foreign Banks: Default loans are Tk 3,245 crore, representing 4.99% of total loans.
Specialised Banks: Default loans stand at Tk 5,813 crore.
Underlying issues
Experts attribute the alarming rise in default loans to systemic issues such as:
1. Irregularities and corruption: Fraudulent activities and scams have drained resources.
2. Policy gaps: Lack of effective measures to address recurring defaults.
3. IMF pressure: Greater transparency in reporting has brought hidden defaults to light.
Default loans have acted as a poison for the banking sector, reflecting its fragile condition after years of unchecked mismanagement, according to industry insiders.
Husne Ara Shikha, executive director and spokesperson of Bangladesh Bank, attributed the loan scenario it to changes in the banking regulations aligned with international standards.
Previously, the grace period for term loans was six months. This has now been reduced to three months, leading to a higher classification of defaulted loans. Additionally, sluggish business activity has reduced loan repayments, further exacerbating the default situation, she told newsmen.
