Default rates declined compared to outstanding loans last year, but showed a slight rise in volume, as some banks could not rein in their bad loans.
According to Bangladesh Bank (BB) statistics, state banks succeeded in cutting their loan default rates, but private, foreign and specialised banks saw their bad loans shoot up.
In the overall banking sector, the defaulted loan situation has improved because of continuous monitoring by the central bank, said a BB official. However, in some banks, defaulted loans went up, resulting in a little increase in volume.
On December 31, 2010, the defaulted loans of the banks were Taka 227.09 billion (US$ 3.19 billion) or 7.27 per cent of the outstanding loans. A year ago, it was Taka 224.82 billion or 9.21 per cent of the outstanding loans.
The volume of total defaulted loans increased by Taka 2.27 billion or 1 per cent last year compared to the previous year.
The central bank evaluates the loan default situation on a quarterly basis. The situation improved substantially on December 31, 2010 over the third quarter.
In the third quarter, the defaulted loans reached Taka 240.88 billion but the banks brought down the figure by around Taka 20 billion at the end of the year. The amount of bad loans in the banking sector is still huge if the loans being written off are taken into account.
According to the statistics updated until June last year, the banks wrote off bad loans worth about Taka 174 billion since June 2004. Of the amount, Taka 21 billion was written off in the last fiscal year. Following a central bank guideline, the banks for the first time introduced a system of writing off loans in 2003.
A BB official said the central bank is going to take various reform programmes in the banks which will further improve the default loan scenario.
The bank company act is going to be amended further to tighten monitoring of the commercial banks' activities, change the default loan definition, and further streamline the size and tenure of the banks' boards.
In the state banks, the percentage of the defaulted loans of their outstanding loans has come down to 15.66 per cent on December 31, 2010, which was 21.38 per cent a year ago. In amount, their defaulted loans decreased by about Taka 9.9 billion during the one year period.
An official of Sonali Bank said the government has formed a committee headed by Chairman of the bank Kazi Baharul Islam. The official said the four state banks have functioned on the basis of a common approach which had a positive impact on their performances.
In the private commercial banks, the defaulted loans came down to 3.15 per cent of their outstanding loans in December 2010, which was 3.92 per cent a year ago, but the volume of their defaulted loans increased by Taka 2.54 billion in the same year.
In volume, the defaulted loans of the foreign banks increased by Taka 2.05 billion, and in the specialised banks, the amount went up by Taka 7.58 billion.
A BB official said the defaulted loans of most of the banks went down, but the total bad loans increased as the amount of such loans was high in some banks.