Default loan growth slows to single digit

Ctg port

The growth rate of default loans has come down to single digit in the fourth quarter of last year from double digit that continued in the previous three quarters, thanks to the measures taken by the central bank.

The gross default loan rate stood at 9.69% in October-December quarter of the year 2014 from 11.60% in the previous quarter (July-September).

The total default loan amount stood at Tk50,000 crore at the end of December, dropped by Tk7,000 crore  from Tk57,290 in September last year, according to the Bangladesh Bank data.

The reduce in default loans of the state-owned banks mainly helped to bring down the overall default loan rate, said a senior executive of Bangladesh Bank.

The rate of the state-owned banks came down to 22.23% in December quarter compared to 27.42% in September quarter.

The state-owned banks conducted a massive drive to reduce the default loans in the following quarters under Bangladesh Bank pressure as these banks are mainly blamed for the high default rates.

The default loan rate of the private commercial banks came down to 4.98% in December quarter from 6.34% in previous quarter.

The foreign banks and specialised banks witnessed rise in default loans to 7.30% and 32.81% respectively during the quarter compared to 7.01% and 29.41%, according to the Bangladesh Bank data.

Earlier, the Non Performing Loans (NPL) rate came down to single digit in October-December quarter of the year 2009. Then it remained below 10% till September quarter of 2012.

The banking sector witnessed a rise in NPL since December quarter of 2012 and also saw abnormal growth during the year 2013.

Maximum large business groups faced difficulties to keep continue regular payment of loan installment during the year 2013 while country went through high-voltage of political turmoil. In this perspectives, the uptrend in classified loans continuedin the three consecutive quarters during the last year, despite Bangladesh Bank efforts for bringing out business from the default culture.

Bangladesh Bank relaxed its reschedule policy in December 2013 to facilitated the business groups affected by political unrest.

As a result the default loan rate, though, came down to single digit 8.93% in December quarter of the year 2013 thanks to huge loan rescheduling under the relaxed policy.

The trend did not sustain longer as the clients who rescheduled loan taking advantages failed to continue installment payment further.

The banks have been asked to bring down by any means the rate of default loans to single digit by the end of December.

Bangladesh Bank issued the directive at the bankers’ meeting held in middle of December last year. In response, the bankers demanded of the central bank to further relax the loan rescheduling policy if they have to bring it down below 10%.