Private commerical banks disbursed the highest 77.40 percent loan to the industrial sector
Abu Sazzad: Recovery of industrial term loans declined by 4.01 percent during the second quarter of FY2019 mainly due to poor investment in the private sector, and for that, the large-stakeholders are forcing to pay their loan installment or EMI (Equial monthly instalment, said business people.
According to Bangladesh Bank data, disbursement of industrial term loans increased by 35.65 percent and stood at Tk 24256.13 crore and recovery decreased by 4.01 percent during the second quarter of FY19 as compared to the corresponding period of the previous fiscal year.
Experts said, the recovery of default industrial loan would be a big challenge for the banking sector because the lion share of the non-performing loans (NPLs) amount is holding by the big borrowers of the country.
After taking charges, the new finance minister AHM Mustafa Kamal asked the Bangladesh Association of Bankers (BAB) to undertake necessary steps against the defaulters to reduce the NPL of the banking sector.
Even, the government introducted special loan rescheduling policy to recover bad debt from the banking sector but the effort went in vain.
Banking sources said, big borrowers are very powerful and most of the loans are political consideration, and for this, the recovery team of banks is failing to recover the bad debt of industrial loan.
Soucres said, the default industrial loan stood at Tk 43,620 crore at the end of last year 2018 while the amount was Tk 31,269 crore in 2017.
Total NPL amount stood at Tk 99,371 lakh crore at the end of December last. Last year, banks distributed Tk 94,420 lakh crore to the industrial sector. Of the total distributed amount, the large-scale industry availed Tk 77,000 lakh crore or 81.55 percent. However, the private commercial banks disbursed the highest 77.40 percent to the industrial sector, followed by 14.09 percent by foreign commercial banks, 6.18 percent by state-owned commercial banks and the remaining 2.19 percent by specialized banks.
Sources said, banks distributed industrial loans to the large-scale stakeholders without maintaining proper credit guidelines of the central bank.
Talking to the Daily Industry, Mamun-Ur-Rashid Managing Director of Standard Bank told that the default industrial loan is the key challenge for the banking sector. “We have to take initiatives to reduce the non-performing loans at any cost as the default loans are damaging the reputation of a bank”, he said.
Apart from this, the financial soundness of banks are hampering for raising the industrial loans, he added.
The number of willful defaulters has also increased in the recent years, he said adding banks are forcing to make write-off and rescheduling of bad debts to hide the real amount of NPL.
Dr. Salehuddin Ahmed, former governor of Bangladesh Bank said that actually, the recent rise in default industrial loans was mainly due to the failure of the scheduled banks to take into consideration the risk factors and also absence of effective loan recovery measures.
The impact of default industrial loan is unpleasant for the economy which is hindering private sector credit growth. At the same time, banks are forcing to narrow their disbursement in SME, agriculture and retail loans, he pointed out.
He expressed his concern over rising of default industrial loans in the banking sector. “So, the credit analysts of the banks have to be cautious to set up the credit limit in favour of the industrialists”, he added.
Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) said industrial loan is an important factor for industrialisation in the country.
Due to lack of adequate energy and power, a good number of businessmen failed to repay installments of their loans in due time. He blamed dull business environment, poor infrastructure and lack of power and gas supply to the industries for their failure to repay the loan installments
She urged the government to provide power connection immediately to the new factories.
However, economist claimed the big borrowers are availing loans for political consideration as they are influential. Artho- rin- adalat is applicable for the petty defaulters but not the large stakeholders, they added. Banks are forcing to approve the industrial loans in favour of the big borrowers for political pressure. At the same time, directors of the banks are being influenced by the big borrowers.
Lack of good governance and corporate culture are one of the major reasons behind increasing default industrial loans resulting capital and provision shortfall of banks. Since last year, a good number of banks have been facing severe crisis for their shortfall of capital and provision.
“If we fail to ensure good governance, corporate culture, corruption and political interference free in approving larger-scale industrial loan, the endless journey of default loan would not prevail in the banking sector. The NPL is foiling the financial health of the banking sector which is impeding the growth of country’s economy”, they said.