Miserable banking sector: How long will the govt let go of loan defaulters?

EditorialProthom Alo illustration

People had hoped the government would take a solid stance against loan defaulters to help the banking sector pick up pace in dealing with the current economic crisis. Instead of following that path, the policymakers, however, are trying to provide everyone with a false sense of comfort by showing lower amount of defaulted loans.

On the other hand, the government will have to depend indeed on the delicate banking sector for the big digit budget they have presented without making arrangements for funds. If the government tries to meet the budget deficit from the banks, the private sector will be deprived of loans. And the businessmen have already voiced their concerns.

In reality, there’s no reflection of the loud promises Awami League had made about bringing order back in the banking sector after coming to power in 2009. Rather in the last 15 years, private bank owners and loan defaulters have been given unfair benefits one after another. And, they have been excused.

They were given special facility in the name of reforming loans in 2015. They were provided special rebate in case of writing off loans as well. So, even though the defaulted loans are shown Tk 1.82 trillion (182,000 crore) in Bangladesh Banks’s records, the actual amount of defaulted loans is way higher.

A discussion titled ‘Reasons of the miseries in Bangladesh’s banking sector’ organised by Economic Reporters Forum (ERF) in capital’s Paltan area on 13 July reflected only the miserable state of the banking sector. Economists and journalists have blamed the wrong policies of the government for this condition of the banking sector.

During the discussion Policy Research Institute (PRI) executive director Ahsan H Mansur said, “Defaulted loans are shown to be 11 per cent in Bangladesh Bank data. In reality the defaulted or bad loans are 25 per cent. The financial sector cannot run like this for long. We have already lost control of the currency market for the lack of monitoring while the inflation has gone out of hand.”  

Ahsan H Mansur has compared showing profit with the income from loan interest instead of realising the actual loan with ‘Eating in luxury from selling off belongings’.

Factual data and statistics are required to identify and solve problems in any sector. But the mismatch of figures has turned into a huge issue in many of the sectors in our economy including banking. In recent years, the Export Promotion Bureau (EPB) has shown a lot more export than the records of export provided by the National Board of Revenue (NBR). And the government steps taken based on EPB’s data have also been proven wrong.

The same thing has happened in case of defaulted loans. When criticism about the defaulted loans had been raging in every quarters, the government showed a lesser amount of defaulted loans adopting various tactics. This type of misinformation will give a wrong message not only for the banking sector but also for the overall economy. Even it will have a negative impact on foreign trade as well, believe the people concerned.

Now the question, will the government push the banking sector towards a catastrophe trying to protect a few loan defaulters? If they don’t do that they have to share the factual information of loan with the public. While presenting the budget of 2024-25 fiscal year finance minister Abul Hassan Mahmood Ali had promised to bring down defaulted loans to 10 per cent.

Earlier, the Bangladesh Bank had also created a roadmap to bring back order in the banking sector. They had taken an initiative of merging good banks with the bad ones. The people of the country has not benefitted from any of these yet. But if the Bangladesh Bank wants to reduce defaulted loans for real, stern actions have to be taken against the loan defaulters.

Let's stay away from ‘eating lavishly by selling off the belongings’.