Dhaka,  Thursday
25 July 2024

Rising defaulted loans

When will the government return to relief?

Editor, The Daily Messenger

Published: 08:38, 14 June 2024

When will the government return to relief?

Photo: Collected

Although strict measures are demanded from the policy-making level to recover defaulted loans, the actual picture is completely opposite. Uneasiness is increasing day by day among the central bank as well as government policymakers. The government took conditional loans from the IMF to counter the effects of the global recession, with one of the conditions being the reform of the country's banking sector and the reduction of defaulted loans. However, far from meeting that condition, the debt continues to rise. The country's banking sector appears unable to escape the syndicate of defaulted loans, impacting not only the concerned banks but also the industrial sector.

Worryingly, even after numerous horrific loan frauds and defaults came to light, such incidents have not ceased. As a result, the banking sector is now suffering from a multifaceted crisis due to defaulted loans, including liquidity crunch, provision shortfalls, capital shortfalls, and declining earnings.

Before announcing the proposed budget, Finance Minister Abul Hassan Mahmood Ali stated, "I want to catch the defaulters; I will catch them now." However, the proposed budget did not mention any steps to catch the defaulters, nor did it include the word 'debtor' anywhere in the budget speech. Instead, data from Bangladesh Bank, released on the day of the budget, revealed that the amount of defaulted loans increased by Tk 36,367 crore, reaching Tk 1,82,295 crore in the three months from January to March, the highest ever recorded. Experts estimate that the actual amount of defaulted loans exceeds Tk 5 lakh crore. Needless to say, this picture of defaulted loans does not bode well for the overall economy.

We believe that the primary reason for the increasing bad debt in the country's financial sector is the lack of action against defaulters. It should not be forgotten that if good governance is not established in the banking sector, the escalating bad debt situation will lead to dire consequences for the country's economy, which the people will ultimately have to bear. Therefore, it is not enough to merely tighten laws to bind the debtors; the political will of the government is also necessary.