A DECLINE in the non-performing loans recovery ratio, which is concerning, suggests that the measures taken are not effective and stringent enough. The recovery ratio of non-performing loans dropped significantly in the final quarter of 2024, with the ratio standing at 3.44 per cent, down from 5.12 per cent in the corresponding 2023 quarter, as data of Bangladesh Bank show. The decline in recovery ratio is largely because of the new classification standards and changed loan classification policies that the central bank has adopted to get the actual picture of default loans. The central bank has reduced the time frame to classify any loan as defaulted from the earlier 270 days to 180 days. Since the adoption of international loan classification standards, the volume of non-performing loans has skyrocketed by Tk 2 lakh crore in a year, reaching a staggering Tk 3.45 lakh crore by December 2024. The figure was Tk 1,45,633 crore in December 2023. During the Awami League regime, a massive amount of toxic loans was not shown as defaulted through data manipulation and a mere 10 per cent of loans were shown as defaulted.
With the recent default loans figure, about 20 per cent of total bank loans, amounting to Tk 17.11 lakh crore, have been classified as non-performing, the highest ratio in South Asia. About 42 per cent of outstanding loans in state-owned banks and about 15 per cent of outstanding loans in private banks have been classified as non-performing. A white paper released on December 2, 2024 also showed that distressed assets in the banking sector, including non-performing, rescheduled, restructured, written-off and litigated loans, crossed Tk 6.75 lakh crore by the end of 2023鈥�24. It is feared that the figure can reach about 30 per cent as the central bank is set to further reduce the time frame for loan classification to 90 days beginning in April. The banking sector has suffered systemic corruption and political influence for 15 years, when massive amount of money was syphoned off in fake and fictitious names, loans were often reported as 鈥榬egular鈥� through data manipulation and lenient policies allowed repeated rescheduling. The total non-performing loans stood at Tk 22,481 crore in 2009, when the Awami League assumed office. Non-bank financial institutions have also suffered a sharp increase in non-performing loans, with many of the institutions having more than 90 per cent of their outstanding loans having been defaulted.
The authorities should, therefore, take a more stringent approach to recovering non-performing loans. The authorities should also address the flaws in the legal framework regarding loan recovery that a January 2025 report by the government task force on economic reforms has revealed.