A kind of deadlock has been going on for several months in the business of the country. The stalemate that had been going on since before the interim government assumed power has now been prolonged. According to the government, business establishments are closing down one after the other, and the amount of bad loans is increasing.
According to the central bank data, loan money is coming back to the bank less. Not only that, the amount of risky assets in the banking sector has increased by more than one lakh crore rupees in one year. The Financial Stability Report of Bangladesh Bank has mentioned that the amount of distressed or risky loans of the banks at the end of 2023 stood at Tk 4 lakh 75 thousand crores. These loans include defaulted loans, rescheduled loans and write-off loans. However, in June this year, the amount will be added by at least one lakh crore rupees. Because money has been taken out of the bank like a stream of water during the last period of the outgoing government.
According to Bangladesh Bank’s 2023 Financial Stability Assessment Report released on September 26, the amount of risk assets in the banking sector at the end of 2022 was Tk 3.78 lakh crore. That is, the amount of risky assets has increased by Tk 1.09 lakh crore in one year.
However, issues such as the ongoing Russia-Ukraine war, the Israeli-Palestinian conflict and other global and domestic challenges could reduce borrowers’ ability to repay loans, the central bank’s report noted. As a result, the asset quality of the overall banking sector may deteriorate.
Bankers say that during the last period of the Awami League government, there has been a massive looting in the banking sector. Many influential groups, including S Alam, have taken lakhs of crores of rupees anonymously in the name of loans-much of which has been smuggled abroad. Later, Bangladesh Bank has rescheduled these loans to avoid default. The central bank rescheduled loans in droves due to the liberal policies of absconding ex-governor Abdur Rauf Talukder. At that time the rescheduled loans started defaulting again.
Governor of the central bank. Ahsan H. Mansoor recently said in an event that four-five families took Tk 2 lakh crore from the bank.
Meanwhile, 46 companies were completely shut down in August, the month the new government assumed power. Another 26 companies closed in the following month, September. According to the Directorate of Joint Capital Companies and Firms (RJSC) data, 128 companies closed in the last 5 months (May to September). Among them, 83 companies were completely closed in the first three months of the current financial year (July-September). Many business patrons who benefited from the previous government have already left the country, resulting in an overall stagnant business environment.
Not only that, the production of more than 200 garment factories was closed early last month due to worker dissatisfaction. According to BGMEA data, the garment industry lost an estimated $400 million due to labor unrest in Savar, Ashulia and Gazipur in September and October. According to BGMEA, some orders have gone to competing countries due to the law and order situation. Khandkar Rafiqul Islam, president of the organization, said on Saturday (October 19), our industry is not good. We have fallen behind our competitors. Our clothing imports are decreasing in the world. During January-August this year, the amount of clothing imports in the United States has increased by 1.5 percent. But from Bangladesh it has decreased by 3.8 percent. But exports from China increased by 3.6 percent. Similarly, Vietnam has increased by 5.2 percent, India has increased by 7.6 percent and Cambodia has increased by 7.7 percent.
Total imports in Europe increased by 3.3 percent during January-July period. There is an increase of only 2.8 percent from Bangladesh. But China has increased by 6.4 percent, India has increased by 5.18 percent, Cambodia has increased by 18.35 percent, Vietnam has increased by 12.61 percent and Pakistan has increased by 14.41 percent. And judging by the comparative export growth, Bangladesh’s export growth has been 5.34 percent during July-September this year. And Vietnam’s growth has been 15.57 percent and India’s growth has been 13.45 percent. That is, in the third quarter of this year, we have lagged far behind in growth compared to our competing countries. Which indicates a shift in export orders to these countries.
Rafiqul Islam said, “Recently, due to instability in certain industrial areas, our exports and production of around $250-$300 million have been disrupted in the month of September alone.”
Analysts say the political changes have limited the opportunities for some companies to do business. Besides, the business entrepreneurs have to deal with the adverse effects of rising production costs due to inflation, declining sales, high interest rates, labor discontent, transportation and technical problems, shortage of raw materials due to dollar crisis, global wars and sudden floods.
According to the information provided by the companies, the establishments are closing permanently, as per the decision of the board of directors. In the meantime, about 160 companies are in the process of closure. Several institutions have submitted necessary documents along with closure application to RJSC. Again, some companies decided to close the company in the general meeting.
The closure list includes small firms as well as large group firms. These companies registered in the Department of Joint Stock Companies and Firms include both supply and service sector establishments. Besides, the companies registered with new investment plans are also on the closed list.
According to the data of Bangladesh Bank, about 32 percent of the total loans of about Tk 1.5 lakh crore till December 2023 were distressed loans. This figure is about Tk one lakh crore or 26 percent more than the previous year. According to the data of Bangladesh Bank, the current amount of loans in the banking sector is about Tk 16 lakh crores. Out of this default amount is less than 12 percent of the total disbursed loans. However, if large loans including S Alam Group loans are taken into consideration, the rate of defaulted loans may go up to 20 percent.
In this context, Syed Mahbubur Rahman, Managing Director of Private Mutual Trust Bank, told Bangla Tribune, ‘It is a matter of concern that the non-performing loans (NPL) in the banking sector are continuously increasing. Currently, our NPL is a little over Tk 2 lakh crore, but if the loans of some business groups, including S Alam, turn into NPLs, it may become Tk 3 lakh to Tk 3.5 lakh crore. This amount will be excluding the loans in different places with legal framework.
According to the data of Bangladesh Bank, industrial entrepreneurs of the country have rescheduled the most loans so far. The industrial sector accounted for 26.4 percent of the rescheduled debt stock at the end of 2023. The second place was the textile and ready-made garment sector. Entrepreneurs in this sector have rescheduled 20.9 percent of loans. Besides, 11.3 percent of the rescheduled loans are working capital, business 11 percent, import 8.7 percent, construction 6.5 percent, agriculture sector 5.2 percent and other sectors 5.5 percent. Banks last rescheduled defaulted loans worth Tk 91,221 crore in 2023. The rescheduled figure is the highest ever in a year. Besides, at the end of 2023, the status of rescheduled loans of the banking sector stands at Tk 2 lakh 88 thousand 540 crores, which is 18.75 percent of the total loans distributed by the banks. Add rescheduled loans to defaulted and written-off loans and the amount of bad loans will be Tk 5 lakh crore. Analysts believe that the real situation will be worse if the loans taken by many bank managers are taken into consideration.
In this context, the former chief economist of the Dhaka office of the World Bank Zahid Hossain told, “If the bad debts were not accounted for due to the suspension of the court, the bad debts would have been more.” Took loan facility through, but did not repay. As a result, the banks are now under pressure.
Meanwhile, several banks are now under pressure due to disbursement of loans without verification. Some banks are unable to return money to depositors on time. Apart from this, non-banking financial institutions of the country are also increasing defaulted loans. According to the data of Bangladesh Bank, the defaulted loans of financial institutions increased by Tk 822 crore in the three months from April to June this year. At the end of last June, the total amount of defaulted loans has increased to about Tk 25 thousand crores, which is 33.15 percent of the total loans disbursed in this sector.
