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NPLs at six state-owned banks account for 52% of sector total

  • Published at 04:55 pm March 11th, 2019

Janata Bank, with default loans worth Tk17,224.90 crore, has the highest amount

Six state-owned banks accounted for 52% of the banking sector's total default loans of Tk93,911.40 crore, at the end of December 2018, according to the latest Bangladesh Bank  data.

The total amount of these six banks' non-performing loans (NPLs) stood at Tk48,695.87 crore, which was Tk37,326.09 crore in December, 2017.

Default loans of all six banks amounted to 29.96% of their total outstanding loans, with Janata Bank having the highest amount of default loans worth Tk17,224.9 crore (35.72% of total outstanding loans), followed by Sonali Bank at Tk12,061.03 crore (30.06% of its total outstanding loans).  

Agrani Bank’s default loans stood at Tk5,750.54 crore (16.65% of its total outstanding loans), Bangladesh Development Bank’s default loans stood at Tk 886.66 crore (56.54% of its outstanding loans), Basic Bank’s at Tk8,631.85 crore (57.55% of total outstanding loans), and Rupali Bank’s at Tk4,140.89 crore (17.95% of total outstanding loans).

Economists and senior bankers said the culture of impunity enjoyed by loan defaulters, political interference in approving loans, and lack of experience among bankers in dealing with pressing issues, have weakened the already battered banking sector.

Zahid Hussain, lead economist of World Bank in Bangladesh said in the last decade, the country did not encounter any disaster that could have prevented businessmen from repaying their loans.

"The economic growth rate has increased and there has been economic stability in the country, but the number of willful defaulters has increased,” the economist added.

He said the banks cannot avoid blame and responsibility for the soaring default loans, as they are approving loans without "due diligence" or "considering the repayment capacity of borrowers."

In the last one year, Janata Bank's default loans rose by Tk11,406 crore to Tk17,224.90 crore, which was caused by Anon Tex and Crescent Group defaulting on huge loans taken from the bank.

The state-owned bank lent over Tk10,000 crore to Anon Tex and Crescent Group, a Bangladesh Bank report revealed, suggesting Janata Bank did not comply with the central bank’s single borrower exposure limit criteria.

The bank has given loans of about Tk5,500 crore to Anon Tex, which is a clear violation of Bank Company Act 1991, as it provided 25% of the state-owned bank's capital base. According to the act, the single borrower exposure limit is 10%.

Speaking to the Dhaka Tribune, Janata Bank Managing Director Md Abdus Salam Azad, said: “NPLs have increased sharply due to massive lending to Crescent Leather, while the negative growth in earnings is caused by the provisioning of bad loans.”

Although Sonali Bank's default loans decreased in the last one year by Tk1,709.77crore to Tk12,061.03 crore, the bank still holds the second-largest share of NPLs in the sector.

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