Default loans jump in third quarter

Default loans climbed 11.4 percent in the third quarter (July-September) of the year to Tk 57,200 crore as old loans became bad.
In the second quarter, the total default loans were Tk 51,345 crore, according to data from the central bank.
As of September, default loans as part of total outstanding loans stood at 11.60 percent. It was 10.07 percent at the end of June.
A central banker said default loans increased because of the rise in bad loans at state-run banks, including BASIC Bank.
Last year, Bangladesh Bank relaxed rules for loan rescheduling, which many state banks interpreted liberally and de-classified large amounts of loans.   The central bank later classified many of these loans back as they failed to meet the criteria it had set.
Meanwhile, BB recently submitted a report on state banks to the parliamentary standing committee on the finance ministry. The report said that large amounts of default loans are the main problem of the state banks.

Six state banks -- Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank -- accounted for 48 percent of the default loans in the banking sector, according to the report. More than 80 percent of the default loans with the state banks are in the worst category, which is forcing the lenders to provision a large amount of money. This, in turn, is affecting the banks' capital bases.
Even amid this scenario, many banks are advocating for fresh loans to default borrowers, the central bank report said. Not only that, the loans are being given beyond the single borrower exposure limit and without following BB's prudential guidelines, it added.