Banks fond of big borrowers

Borrowers of large loans crossing Tk 20 crore accounted for 32 percent of the banking sector loans in 2017, posing concentration risk for banks, a survey finds.

State-owned commercial banks hold the leading position, delivering 46.57 percent of the loan provided to the large borrowers, according to the survey titled “Credit Operations of Banks 2017”.

The survey conducted by Bangladesh Institute of Bank Management (BIBM) was revealed yesterday at a workshop at its auditorium in the capital. Professor Prashanta Kumar Banerjee, BIBM director, presented the research paper.

Borrowers with loan amount sizes between Tk 1 crore and Tk 20 crore have taken 39 percent of the loans while 18 percent of the loans range between Tk 10 lakh and Tk 1 crore, research data shows.

The highest loan growth—28.69 percent— was observed in the Tk 1 crore to Tk 20 crore category.

Concentration of loans among big borrowers and the growing number of fictitious loan, or those given out to unnamed people, are alarming for the banking sector, Obayed Ullah Al Masud, managing director of Sonali Bank, told the workshop.

Big borrowers discovered a new technique of taking unnamed loans on becoming defaulters, the top executive of the country's largest state-owned bank said.  Generation of such fictitious loans can be prevented by going through six months' transaction history of the respective business, he said.

But influential borrowers do not let bankers check the business history, rather they force the officers to approve loans soon after the accounts are opened, he added.

He said loan concentration increased in two forms -- one among top borrowers and the other among some sectors.

Most of the loans remained concentrated among 20 borrowers in Dhaka and Chittagong city while among businesses textile and garment sectors topped the list, he said.

A significant share of loans belonged to borrowers with accounts of above Tk 20 crore which is risky for the industry, said Mehmood Husain, managing director of NRB Bank.

Rural credit flow is also dissatisfactory, he said, opining that agent banking could play a vital role in disbursing loans in rural areas.

Of the total loan in the banking industry, 90 percent was given in urban areas, according to the survey.

Banks will have to put more emphasis on knowing their customers to prevent generation of fictitious loans, said Syed Waseque Md Ali, managing director of First Security Islami Bank.

He said the amount of default loans was rising due to changes in the behavioural pattern of customers and bankers' tendency of ignoring court stay orders.

A stay order raises the flag on a borrower, so bankers should be cautious on providing loans to such a customer, he suggested.

Borrowers will have to change their mental setup to come out from the culture of becoming defaulters, said Helal Ahmed Chowdhury, supernumerary professor of BIBM.

Customers who showed multiple industries in business cards are mostly fraud and should not be provided finance, he said.

Abu Hena Mohd Razee Hassan, deputy governor of Bangladesh Bank, attended the event as the chief guest while Shah Md Ahsan Habib, a BIBM director, moderated the session.