Soured loans declined in the fourth quarter of last year owing to the moratorium on bank loan payment offered by the central bank.
At the end of December last year, total defaulted loans in the sector stood at Tk 88,734.1 crore, down from 6 per cent from three months earlier, according to data from the Bangladesh Bank.
Default loans accounted for about 7.7 per cent of total outstanding loans at the end of 2020, down from 9.3 per cent a year earlier.
Thanks to the relaxed rules of the central bank, bad loans have shrivelled Tk 5,597.26 crore last year.
Many borrowers have repaid their loans despite the moratorium, which was the reason for the drop in default loans, said Md. Serajul Islam, executive director and spokesperson of the BB.
Soon after Bangladesh announced its first confirmed cases of Covid-19 on March 8 last year, the central bank got down to preparing an action plan to avert a hard landing for the high-flying economy for the incoming coronavirus juggernaut.
And one of the components of the action plan was the loan moratorium facility.
On March 19 last year, the BB asked lenders not to consider businesspeople as defaulters if they fail to repay instalments until June 30 this year. The moratorium was extended twice since then to finally end on December 31 last year.
In 2020, borrowers repaid Tk 37,000 crore, as per BB data.
Aid funds for the businesses hard hit by the global coronavirus pandemic also helped in bringing down the default loan ratio, according to Islam.
Last year, banks disbursed a total of Tk 146,946.93 crore.
In another bright spot, defaulted loans in state-run banks, which have historically been sitting on a heaving pile of soured credit, dropped 10.7 per cent to Tk 42,272 crore in December from three months earlier.
The 41 private banks held defaulted loans amounting to Tk 40,361 crore at the end of December, down 10.4 per cent from a quarter earlier.
The nine foreign banks though failed to bring down their bad loans by as much as the state and private banks.
At the end of 2020, bad loans at foreign banks stood at Tk 2,038 crore, down 0.5 per cent from September.
Some loans have been recovered even amid the pandemic, while some loans were rescheduled last year, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
“That was the reason for the drop in default loans.”
Some sectors are still fighting to recover from the economic fallout of the pandemic.
“The future of the banking sector is uncertain because most businesses have lost their ability to repay the loans,” said Rahman, also the former chairman of the Association of Bankers, Bangladesh, a platform of banks’ managing directors.
Given the regulatory forbearance of the BB, the default loan data has become meaningless as a major portion of the outstanding loans has become irregular due to non-payment, said Ahsan H Mansur, executive director of the Policy Research Institute.
“There is no doubt that the defaulted loans volume would increase at the end of March quarter of the year 2021,” said Mansur, who is also the chairman of Brac Bank.
