Defaulted loans with private commercial banks (PCBs) increased by 37 percent in nine months till September with the rate of rise being the highest in the last three months due to excessive disbursement of low quality loans.
According to Bangladesh Bank (BB) statistics, the rate of increase of defaulted loans was above 100 per cent with more than one third of the 30 PCBs.
On the contrary, defaulted loans with the PCBs were coming down gradually over the last few years.
BB sources said defaulted loans rose due to granting of excessive loans, which caused concern for the central bank.
A BB press release on Thursday said excessive growth of credit (the trend is noticeable especially in the PCBs) was hampering its quality. Defaulted loans with the banking sector, especially private and foreign banks, increased to a significant level in three months from July to September.
The central bank issued the press release to explain why it is taking measures to rein in private sector credit growth.
Sources in the PCBs say as commodity prices have fallen in international market, local businessmen are delaying repayment of import finance loans.
BB officials said they are going to take various measures as defaulted loans with the PCBs went up sharply. The measures include investigating the situation in each bank and taking steps after the probe.
According to BB statistics, on September 30 overall defaulted loan stood at Tk 25,072 crore compared to Tk 22,624 crore at the end of December last year. This showed an increase by Tk 2,448 crore or 10.81 per cent during the period.
In the state owned banks (SOB), defaulted loans rose by four per cent or Tk 552 crore, in the PCBs the increase was 37 per cent or Tk 1,795 crore, in foreign commercial banks (FCBs) the rise was 28 per cent or Tk 55 crore and in development financial institutions the rise was 1.21 per cent or Tk 45 crore.
Among the SOBs, only Sonali Bank’s defaulted loans increased while those with Janata, Agrani and Rupali banks decreased. Defaulted loans with Sonali Bank increased by Tk 1,226 crore.
Among the 30 PCBs, defaulted loans with 20 of those increased.
Of the increased defaulted loans — Tk 1795 crore– with the PCBs, Tk 1,000 crore increased in three months from July to September.
Defaulted loans with 20 PCBs increased by 32 per cent to 245 per cent. Of the 20, 12 PCB’s defaulted loans rose by more than 100 per cent.
Sources in the central bank said, in recent times credit growth of the PCBs was 38 per cent. In some of those, the increase was 50 per cent. Due to quick growth of credit, the banks could not maintain quality of credit.
The IMF has also expressed apprehension that the PCBs would not be able to maintain credit quality.
In a report to the government last week, the IMF said, “There are serious concerns about credit quality, especially among private banks, some of whom have been expanding their loan portfolio at annual rates in excess of 50 per cent.”
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