4 state-owned banks in trouble to recover loans from top 20 defaulters

In the first six months of this year, four state-owned banks managed to recover Tk 119 crore from their top 20 defaulting customers; Which is only 5.43 percent compared to the set target of Tk 2,190 crore.

Bankers and economists believe that this has happened due to ongoing economic slowdown and various irregularities during loan disbursement.

Four state-owned banks – Agrani, Janata, Sonali and Rupali owe Tk 23,421 crore to the top 20 defaulting customers.

A senior official of Bangladesh Bank said, due to various irregularities in the distribution of loans of the state-owned banks, these loans defaulted after a few days.

“No matter how many plans are taken to recover bad debts, recovery is impossible because there are no genuine customers. Institutions should be more careful in disbursing loans and at the same time special supervision by the central bank should be increased,” he said.

According to the central bank report, state-owned Janata Bank owes Tk 8,739 crore to the top 20 defaulting customers; Which is 58 percent of their total defaulted loans.

Janata Bank aims to recover Tk 870 crore from defaulted loans during January-June this year; But the bank has collected only 16 crore rupees or only 2 percent of the target.

Meanwhile, Janata Bank’s target for cash recovery from write-off loans in January-June was Tk 330 crore; But the company has collected only 28 crore rupees or 8 percent from this sector.

Former Managing Director and Chief Executive Officer of Janata Bank. Abdus Salam said, “Actually, banks set aside a large portion of the amount of defaulted loans for recovery. The amount that banks are recovering is very limited, because now the pre-election business activities are going at a slow pace. Due to which customers are unable to repay the loans. Can’t.”

He further said, “Some loans go to sectors that are very difficult to recover. In that case, more caution should be exercised while giving loans. At the same time, the loan recovery committee of the bank should play a more active role.”

In addition, he commented that the payment of defaulted loans has decreased despite the bad business of many companies in the global war situation in the last one year.

The write-off or defaulted loan collection rate is very low – he said, “Loan write-offs are made at a point where there is uncertainty about the collection of the loan. This requires strong legal action; at the same time confiscating assets held as collateral by the customer, or Foreign travel may be banned. Passport confiscation will make defaulting customers more careful in repaying their loans.”

According to the report, state-owned Agrani Bank owes Tk 6,854 crore to the top 20 defaulting customers; Which is 45 percent of their total defaulted loans.

According to Agrani Bank’s MoU with the Central Bank, the target of recovery from defaulted loans is Tk 685 crore during January-June this year; But the bank collected only 12 crore taka or 2 percent.

At the same time, Agrani Bank’s cash recovery from write-off loans was targeted at Tk 400 crore in January-June period. But the company has collected only 19 crore taka or 5 percent from this sector.

The former governor of Bangladesh Bank. Salehuddin Ahmed said, “Now the bankers are very much dependent on the kindness of the big debtors. Please give something and get it, if you don’t give, there is nothing to do.”

He said, “Furthermore, the financial base of the bank is exposed as the banks are in capital deficit year after year. As a result, the trust of the customers on the bank also decreases. Transactions with foreign banks also face difficulties.”

“The central bank needs to take effective steps to strengthen the capital base of the banks. At the same time, this default crisis and debt collection will never be beneficial if we do not select good customers for lending,” he added.

Meanwhile, state-owned Sonali Bank’s top 20 defaulting customers have outstanding loans worth Tk 4,284 crore. The target of collection from these defaulting customers in the first six months of 2023 was Tk 300 crore. However, the company collected only 26 crore rupees.

Also, in the first six months of 2023, only 39 crore rupees have been collected against the target of 500 crore rupees from write-off loans.

Apart from this, despite the target of collecting Tk 335 crore from the top 20 defaulting customers of state-owned Rupali Bank in the first six months of 2023, Tk 65 crore or only 19 percent has been collected.

However, the institution has achieved the highest amount of loans compared to other state-owned banks despite achieving very limited targets.

According to the June 2023 report of the central bank, the total non-performing loans of the five state-owned banks are Tk 74,454 crore, which is 25 percent of the total loans. However, currently the total non-performing loans in the banking sector is 8.16 percent.