State-run banks still hold huge defaulted loans

March 29, 2014

Rescheduling before Jan 5 polls fails to make situation better
The country’s eight state-run banks held 61.51 per cent of the total defaulted loans in the banking sector as of December 31, 2013 despite a rescheduling spree by the banks in the last quarter of the year on political consideration. Three out of the eight state-run banks also failed to keep required provision against their disbursed loans and advances after the end of the fourth quarter of 2013 due to drop in their operating profits.
The eight state-run banks are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, BASIC Bank and Bangladesh Development Bank.
The defaulted loans in the state-run banks stood at Tk 24,963.81 crore, or 61.51 per cent, of the total classified loans amounting to Tk 40,583.01 crore in the banking sector as of December 31 last year.
A BB official told New Age on Thursday that the defaulted loans in the banking sector including that in the state-run banks declined significantly in the last quarter of 2013 after most of the banks had gone for rescheduling of their defaulted loans during the two months before the national elections held on January 5 this year.
Businesses, mostly loyal to the ruling parties, and political leaders had gone for massive rescheduling of their defaulted loans just before the national polls, he said.
He said many political leaders had rescheduled their loans to participate in the national elections while both businesses and banks took the chance to reschedule the defaulted loans to show better performance in their balance sheets.
Moreover, Bangladesh Bank relaxed rescheduling policy for businesses hit by the political unrest in the run up to the national elections that ultimately brought down the defaulted loans.
Despite the rescheduling spree, the state-run banks held the majority of the defaulted loans in the banking sector as on December 31, 2013.
Defaulted loans in Sonali Bank stood at Tk 9,629.23 crore as of December 31, 2013, those in Janata Bank Tk 2,605.26 crore, those in Agrani Bank Tk 3,317.84 crore, those in Rupali Bank Tk 1,053.91 crore, those in Bangladesh Krishi Bank Tk 5,022.50, those in Rajshahi Krishi Unnayan Bank Tk 1,532.22 crore, those in BASIC Bank Tk 1,282.57 crore and those in Bangladesh Development Bank Tk 520.27 crore.
The BB data showed that the classified loans in the banking sector stood at 8.93 per cent of the total outstanding loans of Tk 4,54,435.26 crore as of December 31, 2013. It was 12.79 per cent of the total outstanding loans of Tk 4,43,457.71 crore as of September 30, 2013.
The three state-run banks which failed to maintain the provision against their loans and advances in the last quarter of 2013 are Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and BASIC Bank.
The provision shortfall in BKB stood at Tk 1,691.10 crore as of December 31, that in RAKUB at Tk 297.80 crore and that in BASIC Bank at Tk 126 crore.
The BB official said that existing sluggish business situation amid the political unrest and the recent bank scams were the key reasons for the large amount of the defaulted loans in the state-run banks.
The state-run banks sanctioned huge amount of loans without proper scrutiny which pushed up their defaulted loans, he said.
The state-run banks perpetrated corruption in sanctioning loans in the period, he said.
He said, ‘Political unrest was one of the major causes of the increase in the defaulted loans in the third quarter. The businesspeople failed to repay their loans in due time due to sluggish business in June-September last year.’

-With New Age input

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