Loan defaults spike, state banks better off

Bank loan defaults increased by 0.22 percent or Tk 492 crore in the first six months of this calendar year, but state banks have been able to bring the rate down through rescheduling.
Bankers see the increase as a result of stagnation in trade and commerce, which started during the caretaker government rule.
On June 30, 2009, banks registered Tk 218,729 crore in outstanding loans, of which Tk 22,973 crore or 10.50 percent was counted as loan defaults.
The outstanding loan reached Tk 208,362 crore on December 31, 2008, while loan defaults piled up to Tk 22,481 crore or 10.79 percent of the total unrealised loan.
Four state banks' loan defaults fell by Tk 839 crore or 6.57 percent in the January-June period.
In the same period, 30 private banks' loan defaults increased by Tk 1,059 crore or 18.58 percent.
The figure was Tk 82 crore for nine foreign banks and Tk 119 crore for five specialised banks.
Nurul Amin, managing director of National Credit and Commerce Bank Ltd (NCC Bank), says overall loan defaults have gone up.
He points to private commercial banks' loan default rise as they provide around 70 percent of loans.
Amin blamed the loan defaults on stagnation in trade and commerce during the rule of the last caretaker government.
Even after an elected government came to power, the same sluggish trend continued due to the global financial crisis, the NCC Bank boss said.
Bangladesh saw growth in exports but it was slower than before, he added.
In such a background, the banks cannot exert pressure on businessmen if they do not repay their loans, Amin reasoned out.
But he expects a momentum in business activity as the global recession showed signs of recovery.
Another high official of a private bank said: "Like state banks we did not go for wholesale write-off or rescheduling. As a result, the private banks could not bring down default loans like the banks run by the state."
Chief Executive Officer and Managing Director of Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed said: "Alongside rescheduling, we have also realised cash money. As a result, our default loan has decreased."
The Agrani Bank CEO alleged that the top and willful defaulters are taking advantage of the loopholes in the law.
In the last six months, Agrani retrieved only Tk 2 crore from top 20 defaulters but recovered Tk 127 crore from other defaulters.