About two-thirds industrial loan now gone bad

About two-thirds of the industrial loan has been turned default as of March, said Finance Minister AHM Mustafa Kamal yesterday.

Of the total industrial loans of Tk 90,966 crore, Tk 57,830 crore has gone sour, he told the parliament in response to a query from ruling party lawmaker M Abdul Latif.

As of March, total default loans stood at Tk 95,085 crore, which is 8.07 per cent of the total outstanding loans, according to data from the Bangladesh Bank.

Kamal acknowledged that the amount of classified loans increased slightly in the first quarter of the year.

According to the Bank Company Act, no bank or financial institution has the opportunity to provide loans in favour of a bad client or defaulting borrower.

Contacted, Mahbubul Alam, president of the Chittagong Chamber of Commerce and Industry, said the impact of the pandemic might be the reason behind the increase in default loans in the industrial sector as the businesspeople might not have attained their expected returns from investments.

The industrial sector was badly hit by the pandemic as all the distribution channels were disrupted, he said.

Even then, the industrial units tried to continue production.

He went on to acknowledge that such an increase in industrial default loans is not good for the economy.

The real crisis of default loans has reached an alarming stage, said Muinul Islam, a former professor of the department of economics of the University of Chittagong.

"Since the flow of our remittance is still on, the banks are not facing any deposit crisis. This is why we are not realising how big the problem of default loan is," he added.

Meanwhile, the disbursement of industrial loans also dropped during the pandemic, Kamal said.

In the first quarter of last year, industrial loans amounting to Tk 91,662 crore were disbursed. In the following quarter, it was Tk 74,257 crore.

Loan disbursement picked up in the latter half of 2020 as the pandemic flames were brought under control: in the December quarter, it was Tk 100,533 crore, Kamal said.

At the end of the first quarter of 2021, industrial loan disbursement stood at Tk 90,966 crore.

The finance minister also disclosed that the per capita foreign debt of Bangladesh is Tk 24,890.

In reply to a question, the minister said the current foreign debt stood at $49,458 million.