Consumer loan customers rise while loan balance falls

Although the number of consumer loan customers has risen the loan balance has decreased. The total amount of consumer loans have declined by Tk 220 billion in the three months from last July to September. The number of consumer loan customers has increased by approximately 600,000 during these three months, nonetheless.

Consumer loan growth had been increasing despite the decline in the bank loan balance across nearly all productive sectors, including business, construction, and transport, following the fall of the Awami League government. However, a major setback has hit this sector upon reaching the third quarter of the current year.

People relevant to the sector said that the lending activities of one-fourth of the country's banks have nearly come to a halt in the changed circumstances. Additionally, several banks are writing off defaulted consumer loans due to the easing of conditions. The loan balance has consequently decreased.

A few banks, including BRAC Bank, City Bank, and Prime Bank, continue to perform well in consumer loans.

At the end of September this year, the outstanding consumer loans in the banking sector stood at Tk 1,503.40 billion, accounting for 8.63 per cent of total bank loans, according to Bangladesh Bank data. At the end of last June, consumer loans amounted to Tk 1,726.21 billion, which was 9.95 per cent of total bank loans. As a result, consumer credit fell by Tk 222.81 billion in three months. However, during this period, the number of consumer loan borrowers rose to 5,508,771 from 4,925,355, meaning the customer base increased by 583,416.

Earlier, during the April-June quarter of this year, loans in this sector had increased by nearly Tk 250 billion.

Banks provide loans in various shcemes, including education, medical treatment, marriage, travel, professional loans, car loans, housing loans, loans against provident funds, personal loans against the deposit premium scheme (DPS) and fixed deposit receipts (FDR), as well as credit cards. All of these are classified as consumer loans.

According to the central bank’s records, in the July–September quarter, professional and medical loans, loans against DPS and FDR, and land purchase loans were negatively affected. In some sectors, the number of customers fell, while in others, the loan amounts declined. In certain sectors, both the number of customers and loan amounts decreased.

In June, there were 16,033 customers in professional and medical loans, which fell to 14,311 by the end of September. During this period, the outstanding loans dropped from Tk 116.6 billion to Tk 100.2 billion. In the housing sector, loans declined from Tk 3,143.7 billion to Tk 3,078.6 billion. In the transport sector, loans fell from Tk 660.2 billion to Tk 570.9 billion.

Additionally, loans for purchasing TVs, refrigerators, air conditioners, computers, and furniture fell from Tk 4,465.2 billion to Tk 3,483.8 billion. During this period, loans against DPS declined from Tk 720.2 billion to Tk 534.2 billion, and loans against FDR dropped from Tk 3,040.9 billion to Tk 2,508.8 billion. However, loans increased for credit cards, education expenses, marriage, land purchases, loans against salaries, and travel.

Many banks are now increasing loans against salaries because these loans have a lower default rate. Leading BRAC Bank has already provided digital loans to 45,000 customers. In this way, loans of up to Tk 0.5 million were initially offered, which have now been increased to Tk 2 million.

According to the rules, a customer can take a maximum of Tk 2 million in personal loans, Tk 6 million in car loans, and Tk 20 million in housing loans. Although the interest rates on these loans currently range between 11 and 14 per cent, the interest rate on credit cards can go up to 25 per cent.