Non-performing loans (NPLs) in the industrial sector soared by 24.75% year-on-year to Tk 544.16 billion in the first quarter of the current fiscal year due mainly to willful defaulters and higher bank interest rates.
During the one year period, NPLs in industrial loans increased by Tk 107.95 billion, according to the latest data of Bangladesh Bank(BB).
Senior central bankers said large industrialists who received huge bank loans did not repay in spite of enjoying loan restructuring facilities launched in 2015.
“Large industrial groups misused the BB’s restructuring facility,” said a managing director of a private commercial bank.
Their restructured debts too became defaulted loans, he added.
Meanwhile, on May 16 last year, the central bank issued a special policy on loan rescheduling and one-time exit policy for defaulters to reduce the high amount of defaulted loans.
Under the special policy, defaulters got the opportunity to regularize their loans for 10 years, including one-year grace period, at 9% interest rate, just by making 2% down payment.
According to BB data, total loan disbursement in the industrial sector stood at Tk 1.09 trillion at the first quarter till September last year, up from Tk 944.2 billion at the same time a year earlier.
Of the total disbursed loan in the industrial sector, Tk 894.92 billion was disbursed in large industries, Tk 107.7 billion in medium industries and Tk 85.87 billion in the small industries.
In the quarter, the amount of NPLs in large industries was Tk 350.25 billion, Tk 120.63 billion in medium industries and Tk 73.28 billion in small industries, the central bank data added.
Zahid Hussain, former lead economist of the World Bank’s Bangladesh Office, blamed lack of good governance, corruption, political interference in approving loans, and a culture of impunity for the endless journey of NPLs (non-performing loans) for the soaring industrial loans.
“Willful defaulters are present in all sectors. A large amount of bank loans is sanctioned to the industrial sector, thus the amount of default loans is high in this sector,” he added.
Owing to the economic damage caused by political unrest in 2015, as many as 15 large industrial groups appealed to the Bangladesh Bank for long-term loan rescheduling facility under the central bank's large-loan restructuring policy, according to Bangladesh Bank sources.
In response, the central bank in a major move on Jan 27, 2015, approved defaulters of large loans – Tk 500 crore and above – to reschedule their debts on flexible terms on grounds that they were affected by “various external and domestic factors beyond their control.”
The total non-performing loans (NPLs) of banks stood at Tk 1.16 trillion as of September last year.
Former Bangladesh Bank governor Salehuddin Ahmed said: “The rescheduling policies adopted by the government and the central bank for the banking sector went in the wrong direction. The defaulters were given leverage by these policies. Good borrowers are now feeling discouraged to pay debts.”
The central bank must be rigorous in reducing the default loans and all the facilities extended to the defaulters should be scrapped immediately, he suggested.