THE volume of non-performing loans in the banking sector had already been grim during the toppled Awami League. An even grimmer picture is reported with a staggering Tk 2.85 crore in default loans in September, which is a radical increase from what was reported earlier this year. The central bank data show that the defaulted loans shot up to Tk 2,84,977 crore in September from Tk 1,82,295 crore in March. About 17 per cent of total bank loans, amounting to Tk 16.82 lakh crore, are classified as non-performing, ratio-wise the highest in South Asia. As the interim government enforced stricter regulations, loans that were previously reported as 鈥榬egular鈥� through data manipulation and lenient policies are now surfacing as default loans. Loans held by major business groups, including Beximco, Bashundhara, S Alam and Orion, which are owned by individuals close to the previous government, have become defaulted. As the central bank gains control of scammed private sector banks from the hands of corrupt groups, it is getting more accurate data, as reflected in the report. It is assuring that the government has taken steps to discipline the scam-hit banking sector.
The sorry state of the banking sector is largely because of the questionable steps taken during the previous government that included liquidity support for scam-hit banks without collateral, change in ownership of several banks on political considerations and the decision to lend foreign currency from the reserve to various influential business groups through the Export Development Fund without proper evaluation. Recent reports show that about 20 local businesses owe the central bank about $70 million taken out of the foreign currency reserve. The lenient loan rescheduling policies were termed by many as an incentive to wilful defaulters. In 2022, the central bank introduced a policy that allowed loans to be rescheduled with down payment as low as 2.5 per cent of the outstanding amount and allowed up to 29 years for repayment. It is assumed that wilful defaulters have laundered money out of the country. Recent political unrest and economic stagnation also made it difficult for many businesses to meet their repayment obligations. Against this backdrop, the steps to strictly prevent data manipulation are promising, but the task to streamline the banking sector is challenging and involves judicious investigations of the financial frauds, publishing a white paper and addressing policy loopholes that allowed the corrupt nexus of bank officials, politicians and businesses to flourish and gave wilful defaulters a free reign.
The interim government and the central bank should, therefore, prioritise transparency, accountability and sound management practices in the banking sector. The government should also ensure that the commission set up to investigate the financial crime under the Awami League regime publishes its white paper in time and brings loan defaulters, errant banks and officials to justice. An equal emphasis should be given on locating the laundered money, initiating transnational legal processes and communications with countries where money was transferred.