Loan rescheduling rose 50% in Jul-Sep

Infographic: TBS

Banks rescheduled Tk5,551 crore of their defaulted loans in the July-September quarter last year, which is nearly 50%  – or Tk1,845 crore – higher than the previous quarter.

In the April-June period of 2022, the amount of rescheduled loans stood at Tk3,706 crore.

Bankers attributed the increase in loan rescheduling to the empowerment of bank boards to this end, the lowering of the down payment, and finally, a rise in defaulted loans.

According to the central bank data, in the July-September quarter, state-owned banks rescheduled Tk885 crore, private banks Tk4,524 crore, and specialised banks Tk17 crore.

Due to the Covid-19 outbreak, defaulted borrowers received concessions in 2020 and 2021. Due to this, defaulted loans were under control. As the grace period expired, the amount of defaulted loans began to rise last year.

According to central bank data, at the beginning of 2022, the amount of defaulted loans at banks was around Tk1.03 lakh crore. At the end of June, the defaulted loan increased to Tk1.25 lakh crore, and it further increased to Tk1.34 lakh crore at the end of September.

As defaulted loans continued to rise, in July last year, the board of each bank was bestowed with rescheduling authority. Prior to that, the central bank's approval was required to regularise loans under special facilities.

The new guidelines require a down payment of 2.5-4.5% to regularise defaulted loans. Earlier, 10-30% of the loan had to be paid for its regularisation.

Seeking anonymity, the managing director of a private bank said, "Banks are in a liquidity crisis, and at the same time, the amount of defaulted loans is increasing."

So the banks are rescheduling their loans in order to reduce the number of defaulted loans while also adding liquidity to the banks, which is extremely important for them right now, he added.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told TBS, "Banks are required to reschedule loans when a customer has a long-term default. At the same time, some interest has to be waived in order to get back the principal.

"Usually, banks waive interest in view of customer reality, but some influential borrowers easily take advantage of it through cleverness."

Despite the fact that no customer defaulted due to the Covid concession, Tk13,468 crore was rescheduled in 2020, Tk12,380 crore was rescheduled in the following year, and Tk11,515 crore was rescheduled during the first nine months of the outgoing year.

The banking sector experienced the highest amount – Tk50,434 crore – of loan rescheduling in 2019 as the central bank offered a one-time exit policy that allowed borrowers to regularise loans at only 2% down payment.

According to the Bangladesh Bank report, in the April-June quarter of 2022, the banks waived Tk2,595 crore of interest to their customers. Of this, private banks waived interest to the tune of Tk2,557 crore.

In the July-September quarter, banks waived interest to the tune of Tk350 crore. Of this, the interest waiver of private banks was Tk212 crore.

According to the central bank data, banks waived interest on loans to the tune of Tk2,293 crore in 2019, when the country's overall economic activity was normal.

Banks waived an interest of Tk1,578 crore in 2020 and Tk1,855 crore in 2021. But banks waived interest on loans to the tune of Tk3,166 crore in the first nine months of the outgoing year.