Defaulted loans in the banking sector had crossed 12 per cent during the tenure of the ousted Awami League government. In June last year, during the Awami League government’s time, the amount of defaulted loans in the banking sector stood at Tk 2.11 trillion (2,11,391 crore), which was 12.56 per cent of the total loans disbursed by the banking sector. Even that figure lacks credibility.
After the change of government in August last year, defaulted loans began to rise sharply. This happened because the real picture of many defaulted loans—previously concealed during the Awami League era through various measures and facilities—started to come to light. As a result, defaulted loans increased rapidly. According to Bangladesh Bank data, as of the end of last September, defaulted loans in the banking sector have exceeded Tk 6.5 trillion (6.5 lakh crore). This means nearly 36 per cent of the loans disbursed by the banking sector are now defaulted.
However, one-third of the banks are performing relatively well. Out of the country’s 52 banks, 30 have defaulted loans below 20 per cent. Six banks have defaulted loans between 21 and 49 per cent. Sixteen banks have seen between 50 and 99 per cent of their total loans become defaulted, which has created pressure on the entire sector. These figures have been obtained from Bangladesh Bank’s September-based statistics.
Despite the mounting pressure of defaulted loans, 17 banks remain in a comparatively strong position. These banks have defaulted loan ratios of less than 10 per cent. Among these 17 banks, six have defaulted loans below 5 per cent. Banks with lower default rates are also leading in profitability and are ahead in corporate governance best practices. As a result, these banks have become models for the country’s banking sector.
Banks with lower defaulted loans
According to Bangladesh Bank data, the 17 banks whose defaulted loans are below 10 per cent are, respectively: Citizens Bank, Eastern Bank, Bengal Commercial Bank, BRAC Bank, Prime Bank, City Bank, Midland Bank, Pubali Bank, Meghna Bank, Mutual Trust Bank, Community Bank, Shahjalal Islami Bank, NCC Bank, Dhaka Bank, Uttara Bank, Trust Bank, and Jamuna Bank. Among these, the first six banks have defaulted loan ratios below 5 per cent.
At the top of the list with the lowest defaulted loans is the new-generation Citizens Bank. As a new bank, its loan portfolio is smaller compared to older banks. Therefore, its default rate is low—1.74 per cent of total loans.
Second in terms of low defaulted loans is Eastern Bank, with a default rate of 3.09 per cent. Next is another new bank, Bengal Commercial Bank, whose default rate is 3.24 per cent. Being a new bank, its loan volume is also smaller than others, resulting in a lower default rate. BRAC Bank is in fourth position, with defaulted loans at 3.58 per cent. Prime Bank ranks fifth with 4.01 per cent, and City Bank ranks sixth with defaulted loans of 4.76 per cent.
Asked how BRAC Bank has managed to keep its defaulted loans below 5 per cent during a time of high defaults in the banking sector, BRAC Bank Managing Director (MD) Tareq Refat Ullah Khan told Prothom Alo, “BRAC Bank is run with complete professionalism. Our credit management division is very strong. Even so, when any customer faces difficulties, we stand by them. These initiatives help us keep defaulted loans low.”
Regarding the same success, City Bank Managing Director Mashrur Arefin told Prothom Alo, “City Bank’s business and credit risk management divisions are completely independent. In addition, the board’s loan approval process is also entirely independent. As an MD, I have no scope to intervene. Thirty per cent of our loans are in the corporate sector. The rest are consumer loans, CMSME loans, and credit card loans. Compared to others, our loan portfolio is more diversified. That is why our defaulted loans are still below 5 per cent.”
Among other banks with defaulted loans below 10 per cent, Midland Bank’s default rate is 5.40 per cent, Pubali Bank’s is 5.5 per cent, Meghna Bank’s is 6.11 per cent, Mutual Trust Bank’s is 6.83 per cent, Community Bank’s is 7.07 per cent, Shahjalal Islami Bank’s default rate is 7.67 per cent, NCC Bank’s is 8.31 per cent, Dhaka Bank’s is 8.44 per cent, Uttara Bank’s is 8.91 per cent, Trust Bank’s is 8.95 per cent, and Jamuna Bank’s defaulted loans stand at 9.06 per cent.
Regarding the low default rate, Prime Bank Deputy Managing Director (DMD) Ziaur Rahman told Prothom Alo, “For the past four to five years, Prime Bank’s defaulted loan ratio remained between 3.5 and 4 per cent. Due to the country’s overall economic challenges, it temporarily rose to 4.22 per cent toward the end of last year. However, it has now come down to 3.8 per cent. We expect to bring it below 3 per cent by the end of December. To achieve this target, recovery, monitoring, and write-off activities are being carried out in a planned manner. We are working to prevent new loans from becoming defaulted and to increase the recovery of classified loans.”
Banks with highest defaulted loans
During the previous government’s tenure, Islamic banks suffered the most plundering. At the same time, some conventional banks also faced similar losses. As a result, most of the loans of these banks turned defaulted. Among the country’s banks, Union Bank has the highest defaulted loan ratio at 96.64 per cent. This is followed by First Security Islami Bank at 96.20 per cent, Global Islami Bank at 95.70 per cent, Padma Bank at 94.17 per cent, and ICB Islami Bank at 91.38 per cent.
Additionally, AB Bank’s default rate stands at 84.04 per cent, National Bank’s at 75.46 per cent, Janata Bank’s at 73.18 per cent, and Bangladesh Commerce Bank’s at 71.11 per cent. BASIC Bank’s defaulted loan ratio is 70.59 per cent, while Social Islami Bank’s is 70.17 per cent. IFIC Bank’s default rate is 60.63 per cent, Islami Bank’s is 58.24 per cent, and Exim Bank’s is 56.86 per cent.
Among the banks heavily burdened with defaulted loans, Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, and Union Bank have been merged to form United Islami Bank. Exim Bank was under the control of former Bangladesh Association of Banks (BAB) chairman Nazrul Islam Mazumder, while the other four were under the control of S Alam Group owner and widely discussed businessman Saiful Alam from Chattogram. Both are known to be close to ousted Prime Minister Sheikh Hasina.
Speaking about the defaulted loan situation, Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan told Prothom Alo, “Banks have been instructed to disclose the real picture of their loans. As a result, defaulted loans have increased significantly. We hope that the default rate will gradually come down in the future. Various initiatives have already been taken for this. Although defaulted loans in the banking sector have increased, many banks are in a good position.”