Rescheduled loans go awry

Loans rescheduled by banks to help business tide over losses caused by last year's political turmoil have ended up in the red, adding to the volume of 'bad loans' in the country.

Bangladesh Bank statistics for July-Sept quarter this FY indicates the amount stuck in 'bad loans' at Tk 572.9 billion.

That is 11.60 percent of the total loans disbursed.

The quantum of 'bad loans' stood at Tk 513.4 billion in the April-June quarter -- or 10.75 percent of the total loans disbursed at that point of time.

That's a jump of Tk 59.4 billion in the first quarter of FY 2014-15.

"There are some reasons we are witnessing a jump in bad loans. That is partly because of the new method by which it is being calculated," central bank Deputy Governor SK Sur Chowdhury told bdnews24.com.

He said some loans rescheduled to help businesses offset losses due to political turmoil have gone bad.

"But all such loans cannot just yet be categorised as sub-standard. Still three months are left for them to be turned round."

Loans not serviced are first categorised as 'sub-standard' and then as 'doubtful' before they are declared 'bad' meaning not recoverable.

Loans worth Tk 90 billion have now been categorised as 'sub-standard', said Sur Chowdhury.

After the 2013 political turmoil, Bangladesh Bank responded to appeals from business and rescheduled many unserviced loans on the basis of case-to-case evaluation. This had led to rescheduling of nearly Tk 160 billion in defaulted loans from the banking sector.

According to the central bank data, the total amount of disbursed loans was at over Tk 4.93 trillion at the end of September.

Of defaulted loans, nearly Tk 208 billion was with the four state-owned commercial banks.

The amount of defaulted loans in the private banks was at nearly Tk 222 billion.

The foreign banks had Tk 16.38 billion in defaulted loans at the end of September while it was Tk 126.6 billion in the specialised banks.