The top 20 defaulters accounted for one-third of the state banks' total default loans in the first half of 2017, according to the finance ministry.
As of June, the defaulters owed Tk 11,579 crore to Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank (BDBL), with the amount being 33.48 percent of the lenders' total default loans, according to a paper prepared by the finance ministry.
The paper was presented at a workshop styled “Review of the Health of State Banks: Way Forward to Face Challenges”, organised yesterday by the finance division at the Cirdap auditorium in Dhaka.
BDBL's 52.5 percent default loans were held by the top 20 defaulters, followed by 51.3 percent for Rupali and 49 percent for Janata, the paper shows.
The rising default loans put pressure on the state banks' capital, compelling the government to inject funds into them for their survival, said Md Eunusur Rahman, senior secretary of the bank and financial institution division, who presented the paper.
Over the last four years the government injected Tk 9,639 crore into the state banks. This fiscal year, Tk 2,000 crore has been set aside for the purpose.
The capital adequacy ratio of the state-run commercial banks was 6.99 percent, which is far below the regulatory requirement of 10 percent.
Finance Minister AMA Muhith blamed the bankers for the increasing default loans: they do not release funds to clients as per schedule, which in turn leads to the projects' failure.
“Bankers do it consciously, so that clients default on their loans and come under their control,” the minister added.
SK Sur Chowdhury, a deputy governor of the Bangladesh Bank, acknowledged that there is a problem in loan disbursement, which is why new loans are defaulting.
“But the performance of the state banks is not as bad as commonly perceived. The banks are making profit but the higher provisioning requirement against their bad loans sets them back.”
Chowdhury said banks should follow the report from the BB's Credit Information Bureau before lending to clients to prevent a loan from defaulting.
The default loans of the six state banks stood at Tk 34,581 crore, which was 27 percent of their loans.
In June, the average default rate in the banking sector was 10.13 percent.
Banks should follow ethical lending practice to bring down the default loan ratio, said Fazle Kabir, governor of the BB.
He also called upon the banks to put in more effort to recover write-off loans.
The requirement for collateral is a major constraint for the success of a business project, said Md Ataur Rahman Prodhan, managing director of Rupali Bank.
He said if clients want to borrow Tk 100 crore for a project they need to provide security worth Tk 150 crore. “The project starts to fail from this point,” he added.
Zaid Bakht, chairman of Agrani Bank, said the financial performance of state banks becomes poorer as they participate in the development activities of the government.
Under the social safety net programme of the government, the banks channel money across the country without any service charge, which costs them Tk 100 crore, he said.
The board members of state banks do not have shares in the lenders, so they do not feel any ownership, said Hedayetullah Al Mamoon, senior secretary of the finance division.
Subsequently, banks should float shares in the stockmarket to bring shareholders to the board, he added.
MA Mannan, state minister for finance, asked banks to cut costs to make profit. “Banks should be allowed to make the call on whether they will open or close a branch.”
Commercial banks, both private and public, have 9,720 branches across the country, 53 percent of which are owned by state banks, according to the finance division paper.
The number of accountholders stood at 8.14 crore as of December 2016, 54 percent of which are with eight state banks.
The eight banks also account for 31 percent of the total deposits of Tk 952,000 crore in the banking sector as of June.