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Wednesday, June 12, 2019

Bad management helps soaring the bad loans

DEFAULTED loans soared to Tk 110,874 crore as of March this year, which is the highest ever in the country's history. Bangladesh Bank on Monday revealed that Tk 16,962 crore of classified loans were added to the tally in the first quarter of this fiscal. It's also a record. Presently, the defaulted loans are 11.87 percent of total outstanding loans, up from 10.30 percent in December 2018.
The latest revelation of central bank is nothing surprising to us at all as we have already witnessed that entire banking sector is on the verge of collapse due to widespread corruption. The amount of defaulted loan was Tk 93,911 crore in the last fiscal. But not taking any initiatives to recover the loans and punishing the defaulters; the central bank had extended some extra ordinary facilities to loan defaulters, including easing the payment of instalments. The result was obvious -- many defaulters stopped paying instalments.
That means, Bangladesh Bank's strategy to lower default-loan figure giving extra facilities to defaulters has backfired. At one stage, the High Court stayed the implementation of the new loan rescheduling policy until June 23. But most defaulters still believe that they would be able to enjoy the benefits. And for this trend, it was not possible to curb upward trend of defaulted loans.
There are widespread allegations that banks have been forced to disburse loans to some certain quarters due to political influence. These politically-backed loan defaulters even don't think about to repay the money. So, the escalating defaulted loans have already choked private investment and limited the government's capacity to subsidise various sectors.
There is no way but the government and the central bank will have to take full responsibility for this awkward situation. We fear the country's total economy will have to bear the brunt of the soaring non-performing loans, if the government doesn't take immediate stringent measures against the defaulters.
It's not hard to understand why the new Finance Minister took the wrong move which gave a green signal to the defaulters that the government is flexible for them. The answer is simple. There is nothing to hide that; instead of serving the purpose of common people, the Ministry concerned tried to make benefitted a politically influential quarter.