Default rate on bank debts surges in Bangladesh

The amount of bad debts in Bangladesh’s banking sector has increased frustrating efforts to contain the crisis.

The amount of default loans totalled over Tk 1.16 trillion at the end of September. It was around 12 percent of the total debts disbursed by the banks.

The amount was around Tk 40 billion more than what it was in June and Tk 223.77 billion more than in the beginning of the year.

The Bangladesh Bank account of bad loans, however, is questioned by the International Monetary Fund, economists and bankers.

The total amount of bad debts would have been around Tk 2.5 trillion had the central bank counted rescheduled loans, regularised debts, and those frozen in courts.

The IMF in a recent report submitted to the government recommended that the central bank take these debts into account. An IMF team made the report after visiting Bangladesh twice at the invitation of the government to review the state of the banking sector.

After taking charge in January, Finance Minister AHM Mustafa Kamal announced his intention to curb bad loans.

People buying new currency notes at Gulistan before Eid. Photo: asif mahmud ove

Subsequently, the central bank introduced an amnesty scheme for the defaulters to reschedule their debts with 2 percent down payment, a maximum 9 percent interest and repayment tenure of 10 years.

Many other measures have been taken to resolve the problem, but these appear to have failed.

Speaking to bdnews24.com on Wednesday, Bangladesh Bank spokesman Serajul Islam said he hoped the amnesty scheme would bring down the amount of bad debt by the end of the year.