The banks have recovered Tk 9,791 crore in non-performing loans during the October鈥揇ecember quarter of 2024, posting a 23 per cent rise from Tk 7,960 crore in the same period of 2023.
This increase in the recovery volume, however, comes amid a deteriorating scenario in the overall loan portfolio, plagued with a staggering surge in defaulted loans and a declining recovery ratio.
Despite the apparent rise in collections, the NPL recovery ratio鈥攎easuring the percentage of recovered loans from total outstanding defaulted loans鈥攄ropped significantly in the final quarter of 2024.
The ratio stood at 3.44 per cent in the final quarter of 2024, down from 5.12 per cent in the same quarter of 2023 and 3.93 per cent in 2022, according to the data of Bangladesh Bank.
Total volume of loan recovered from defaulted accounts in 2024 stood at Tk 24,091 crore.
Financial experts put down the situation largely to an entrenched culture of defaulting on loans which can be broken, they say, only with firm approach and measures.
Mustafa K Mujeri, executive director at the Institute for Inclusive Finance and Development, told 抖阴精品 on Monday that banks had been taking insufficient steps in recovering bad loans, largely due to the central bank鈥檚 failure to enforce stricter recovery measures.
He emphasised that recovering bad loans was particularly challenging in a country like Bangladesh, where defaulting on loans has become normalised.
The economist pointed out that while banks needed to adopt a more aggressive approach to recover defaulted loans, they instead continued with their usual, inefficacious effort.
As a result, they had not been successful in tackling the growing issue of non-performing loans.
He also noted that state-run banks were seeing limited success in recovering NPLs.
Bankers attributed the decline in recovery ratio to the massive growth in the volume of NPLs in recent months.
At the end of December 2024, defaulted loans in the banking sector reached a record Tk 3.45 lakh crore鈥攁n increase of nearly Tk 2 lakh crore within a single year.
The NPL figure was Tk 2.84 lakh crore in September, Tk 2.11 lakh crore in June, Tk 1.82 lakh crore in March, and Tk 1.45 lakh crore in December 2023.
The sudden escalation is largely due to the exposure of previously concealed bad loans that had been masked under manipulated data during the tenure of the previous Awami League government.
Currently, around 20 per cent of total outstanding bank loans鈥攁mounting to Tk 17.11 lakh crore鈥攁re classified as non-performing, making it the highest NPL ratio in South Asia.
Banks, meanwhile, have managed to recover only Tk 523 crore from written-off loans in the October鈥揇ecember quarter, marginally up from Tk 484 crore recovered in the same quarter of 2023.
The total volume of outstanding written-off loans stood at Tk 81,578 crore at the end of December 2024, up from Tk 53,612 crore a year earlier鈥攊ndicating a sharp rise in assets permanently removed from the banks鈥� books but still legally collectible.
Banks continue to struggle in collecting dues from large defaulters, many of whom enjoy legal and political immunity.
M Masrur Reaz, chairman of Policy Exchange Bangladesh, told 抖阴精品 that the amount of recovered loan increased during the reporting period as the actual extent of non-performing loans began to surface following the political shift on August 5.
He noted that the government and the central bank had been making efforts to recover bad loans while simultaneously putting pressure on banks.
The recovery ratio has declined due to several factors, including the country鈥檚 complex and time-consuming legal system, he further said.
Reaz emphasised the need for comprehensive legal reforms to address these structural barriers.
He also mentioned that while the central bank had removed some errant individuals from the boards of certain banks, overall discipline in the banking sector had yet to be restored.
A January 2025 report by the government task force on economic reforms revealed flaws in the country鈥檚 legal framework regarding loan recovery.
The task force notes that defaulters frequently exploit the legal system by securing stay orders from higher courts, effectively stalling cases for years.
Moreover, the Bankruptcy Act of 1997 which applies only to individuals and not corporate entities prevents legal action against large businesses that are loan defaulters, it points out.
Over the years, legal reforms and regulatory policies have disproportionately favoured politically connected bank directors and influential borrowers, further eroding governance in the financial sector, the taskforce observes.
Bankers also criticised Bangladesh Bank鈥檚 leniency, especially regarding the rescheduling of classified loans.
In 2022, the central bank introduced a controversial rescheduling policy allowing defaulters to reschedule loans for up to 29 years with minimal down payments as low as 2.5 per cent, compared with the earlier standard of 10 per cent.
This has incentivised habitual defaulting rather than ensuring repayment, according to financial experts.
A white paper released on December 2, 2024, revealed that distressed assets in the banking sector鈥攊ncluding NPLs, rescheduled, restructured, written-off, and litigated loans鈥攃rossed Tk 6.75 lakh crore by the end of FY2023鈥�24.
The paper described the banking sector as the most corruption-ridden, driven by regulatory failure, weak legal enforcement and political interference.
