Publication Date : 14-05-2013
Bangladesh witnessed a high rate of loan defaults in the first quarter of 2013, due mainly to political unrest.
“Loan defaults tend to go up in the first quarter following the December closing, but this year’s rise is higher than normal,” a managing director of a private bank said, preferring not to be named.
On March 31, the total amount of defaults stood at 510.19 billion Bangladeshi taka (US$6.42), an increase of 19.4 per cent from the quarter that ended on December 31, 2012, according to data from the central bank.
“The frequent shutdowns, particularly in the last two months of the quarter, which caused stagnation in trade and commerce, account for the increase in defaults,” Khondker Ibrahim Khaled, a former deputy governor of Bangladesh Bank, told The Daily Star.
Nurul Amin, chairman of the Association of Bankers Bangladesh, and ZaidBakht, research director of Bangladesh Institute of Development Studies, echoed Khaled’s views.
Between January 1 and March 31, the state-owned commercial banks experienced a 27.88 billion Bangladeshi taka increase in defaults, while the private commercial banks’ defaults rose by 48.44 Bangladeshi taka.
The foreign commercial banks saw their default loans increase by 2.14 billion Bangladeshi taka, and the specialised banks by 3.48 billion Bangladeshi taka.
“The localised strikes enforced in different parts of the country caused as much damage as the nationwide shutdowns. They severely hamper the smooth functioning of trade and commerce,” added the manager director. “Consequently, many good borrowers have ended up in the red.”
The various scams that took place last year also had a role to play in the rising amount of default loans, according to Bakht, also a director of Sonali Bank.
“The banks are now financing very cautiously. As a result, many genuine borrowers were unable to get rescheduling facility--and thereby became defaulters.”
Following the Hall-Mark scam last year which centred on bill purchase, many good businessmen were denied their payments in time, which led them to default as well.
Furthermore, many bank officials said the inspection drive by the central bank towards the end of last year led to the unearthing of many defaults, all of which were reflected in the first quarter’s figure.
In 2012, a lion’s share of the default loans was in the state-owned banks, particularly the Sonali Bank, because of the various scams that took place.
Interestingly, of the four state-owned commercial banks only Sonali Bank was able to cut its default loans down by 3 billion Bangladeshi taka, in the first quarter of 2013. Sonali Bank’s default loan total now stands at 117.46 billion Bangladeshi taka. “The fall in default loan was due to a pick-up in recovery,” Pradip Kumar Dutta, managing director of Sonali Bank, told The Daily Star.
During the quarter, Dutta said the bank has recovered 15.03 billion Bangladeshi taka, whereas it managed only 8.46 billion Bangladeshi taka in the whole of the last year.
“The liquidity situation of Sonali Bank has much improved this year. We have not borrowed from the call market or the central market at all; rather, we lent them money.”
But loan defaults rose at three other state-owned commercial banks: Janata, Agrani and Rupali.
US$1 = 79.42 Bangladeshi taka
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