Default loans decline slightly

Banks' default loans dropped 6.22 percent to Tk 51,300 crore in the last quarter of 2015 mainly due to restructuring of big loans.

On December 31 last year, bad loans accounted for 8.79 percent of the total loans in the banking system, which was 9.89 percent on September 30.

The amount of total default loans at the end of September last year stood at Tk 54,708 crore.

The reason for the drop in bad loans is that banks wrote off a large chunk of their piled-up bad loans in the last quarter following instructions from Bangladesh Bank, said Subhankar Saha, executive director of the central bank.

The BB directed banks to cut their default loans by making proper use of the central bank rules.

A good number of loans were restructured or rescheduled by applying the rules properly, which also helped cut the bad loans.

The BB last year gave an opportunity to reschedule loans of large borrowers. Some 11 large borrowers rescheduled Tk 15,000 crore of loans with the approval of the central bank.

Besides, banks were sincere in recovering their bad loans last year, forming a special taskforce for the purpose, Saha said.

The BB has also appointed observers in state-owned banks and some private ones. The observers closely monitored the loan management process of the banks.

Yet, the five state banks saw their bad loans rise between the months of September and December last year.

The default loans of state banks rose 4.47 percent, or Tk 1,017 crore, to Tk 23,744 crore, according to central bank statistics.

The highest increase was at the scam-hit BASIC Bank, where the amount rose by about Tk 2,000 crore.

In percentage terms, 21.46 percent of the state banks' loans were defaults, which is high in the context of Bangladesh and beyond.

Default loans of each of the private, foreign and government-owned specialised banks dropped.

Default loans of private banks fell 15.53 percent to Tk 20,760 crore. Their default loans on December 31 last year were 4.85 percent of their total outstanding loans.

Foreign banks' default loans in the September-January period decreased 10.30 percent to Tk 1,897 crore.

Their default loans accounted for 7.77 percent of their outstanding loans. Bad loans of foreign banks are higher than that of the private banks, even though they are much cautious about giving loans. Though the bad loan situation improved in the last quarter of 2015, it was worse-off than a year earlier.

On December 31, 2014, the total default loans of banks stood at Tk 50,155 crore.