Defaulted loan rises to Tk 4.2 trillion

Loans distributed through irregularities during the past government have become defaulted. At the same time, the loans of many businesspersons close to the ousted Awami League also have become irregular.

As a result, the amount of defaulted loans in the banking sector rose to Tk 420,334 crore (over 4.2 trillion) at the end of March. The amount stands at 24.13 per cent of all distributed loans, the Bangladesh Bank revealed Sunday.

The amount of defaulted in December last year was Tk 345,765 crore (over 3.45 trillion). That means, the amount of bad loans increased by nearly Tk 75,000 crore (750 billion) in the span of three months.

Bangladesh Bank officials have said that funds were withdrawn from banks under various names, both real and fictitious, during the tenure of the Awami League government—ousted by a student and public uprising. These funds are now beginning to be classified as defaulted loans.

At the same time, with the classification criteria for defaulted loans being raised to meet international standards, the volume of defaulted loans is increasing, they also pointed out.

The officials also said many of the loans that have been renewed are not being recovered. Due to irregularities, the central bank is itself categorising many loans as defaulted, which is further contributing to the rise in bad loans. The amount of such loans may continue to rise in the coming days.

It has been learned that at the end of March, the total amount of loans in the banking sector had risen to Tk 1,741,992 crore (nearly 17.42 trillion), which was Tk 1,711,402 crore (17.11 trillion) at the end of December.

According to data from Bangladesh Bank, as of March, the proportion of defaulted loans in state-owned banks had increased to 45.79 per cent, up from 42.83 per cent in December. In private commercial banks, 20.16 per cent of loans had become defaulted, compared to 15.6 per cent in December.

When the Awami League formed the government in 2009, the total amount of the defaulted loan was Tk 22,481 crore (224.81 billion). Since then, the volume of bad loans has steadily increased.

Economists have long alleged that people close to and influential within the then-government took out large sums of money from banks through various irregular practices, much of which has been laundered abroad.

Since the fall of the government on 5 August last year, the true scale of the defaulted loan crisis has started to emerge. During the previous government’s rule, powerful people were granted a significant amount of loans under favourable conditions. Successive policies were also implemented to artificially reduce the apparent volume of defaulted loans on paper.

Following the change in government, the central bank has abandoned these policies. It has also announced a plan to merge five Shariah-based banks plagued by high default rates.

Sources said that once the banks that were previously controlled by the controversial business conglomerate S Alam Group—closely associated with the ousted Awami League—were freed from its influence, the real picture of their loan books began to surface.

Among them, Islami Bank has seen the highest increase in defaulted loans. Similarly, default rates have surged in First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and EXIM Bank.

At the same time, several major business groups—including Beximco (owned by former Prime Minister Sheikh Hasina’s adviser Salman F Rahman), Bashundhara Group, and S Alam Group—have become loan defaulters, further inflating the defaulted loan amount.