Banks went on a loan rescheduling spree once again in the second quarter of 2018 after holding back in the first quarter.
Between the months of April and June, default loans amounting to Tk 5,879 crore were rescheduled, in contrast to Tk 1,458 crore three months earlier, according to data from the central bank.
Of the total amount rescheduled by banks, two banks accounted for 42.69 percent: state-run Sonali rescheduled Tk 1,340 crore and Islami Tk 1,169 crore.
Bangladesh Bank officials said the large scale rescheduling of non-performing loans would not bring any good to the chaotic banking sector as most of the default loans were regularised bypassing the central bank's instructions.
For instance, Sonali rescheduled more than Tk 1,200 crore of classified loans of a controversial business group by taking only 1 percent down payment.
As per central bank instructions, banks would have to take down payment of 10 percent to 50 percent when rescheduling the toxic loans.
The repayment track record of the business group, which was marked the top defaulter of the bank in December last year, is poor: it became a defaulter despite rescheduling its NPLs a number of times, said a BB official.
The group sought the latest round of rescheduling as its owner will contest in the upcoming national election, said a Sonali official.
Contacted, Md Obayed Ullah Al Masud, managing director of Sonali, told The Daily Star the lender had secured prior approval from the central bank to reschedule the default loans. The group is now making its loan instalments on a regular basis, he added.
Some banks have frequently breached the central bank's norms while rescheduling default loans, the BB official said.
A central bank inspection team has recently found that a first generation bank rescheduled more than Tk 4,000 crore last year by grossly violating banking rules.
The central bank termed the non-performing and rescheduled loans as stressed assets of the lenders as such loans are highly risky for them.
Last year, Islami Bank also rescheduled Tk 3,099 crore and it has also kept the same track this year.
There is a requirement for banks to get no-objection certificate from the central bank when they want to reschedule default loans under extraordinary circumstances.
In recent years, the central bank has given such NOCs to banks on a wholesale basis to keep down the default loan figure, the BB official said upon conditions of anonymity to speak candidly on the matter.
The practice will be damaging for the entire banking sector in the days to come as many of unscrupulous persons receive fresh loans after rescheduling their default ones.
“They then refuse to repay the loans, which is harmful both for the depositors' interest and financial health of banks,” he added.
In 2017, all 57 banks operating in Bangladesh had rescheduled NPLs amounting to Tk 19,120 crore, up 24 percent year-on-year.
Despite huge loan rescheduling, NPLs in the banking sector surged Tk 89,340 crore in June this year, up from Tk 74,149 crore a year earlier.
Courtesy: The Daily Star Oct 16, 2018
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