Bad Debts Going Worse _ the Daily Star

Journalism Without Fear or Favour
TUESDAY, December 6, 2022
Views
Bad debts going worse

Tasneem Tayeb
Mon Dec 5, 2022 07:00 PM Last update on: Mon Dec 5, 2022 07:00 PM
Illustration: Star
M isgovernance, corruption, nepotism and subsequent bad

debts keep plaguing the banking landscape of Bangladesh. Central
bank data reveals that non-performing loans (NPL) have swelled to
a whopping Tk 134,396 crore as of September this year, accounting
for 9.36 percent of the total loans disbursed. Nearly 29 percent of
the loans disbursed by the six state-owned banks have been
defaulted on as of September. This is despite the relaxed loan
classification rules to allow banks to window-dress their accounts
and make their financial health look sound.
According to Selim Raihan, executive director of the South Asian
Network on Economic Modeling (Sanem), the real amount of bad
debt should be over Tk 2 lakh crore. The same thought was shared
by the International Monetary Fund (IMF).
The IMF, during a recent visit to Bangladesh to negotiate the USD

4.5 billion loan proposal, raised concerns once again about the
sustained spiralling of bad debts here. When it suggested that the
overall NPL rate should be brought down to 10 percent, the central
bank assured the international lender that it was already the case
and there should be significant improvement by June 2024.
Destroying the economy to save the thieves

Read more
Interestingly, while these discussions between the IMF and

Bangladesh Bank were going on, a dramatic episode was being
staged at one of the largest commercial banks in the country. In the
first 17 days of November alone, a supposed gang withdrew Tk
2,490 crore from the Islami Bank Bangladesh Ltd (IBBL) as loans.
The total sum this gang took from the bank amounted to around
Tk 7,000 crore, using the names of eight companies whose
addresses exist only on paper. That these loans were disbursed
without proper documentation of the companies that applied has
raised suspicion. How could the IBBL sanction these loans without
due diligence?
Several other banks, including Social Islami Bank Ltd (SIBL) and
First Security Islami Bank Ltd (FSIBL), have also sanctioned loans
to these companies, amounting to around Tk 2,320 crore. Since the
grace period for such loans is one year, they must expire before we
fully understand their fate. But given the circumstances, it would
not be wrong to predict that these debts may go sour as well.
Investigation into the matter revealed that some of the major

beneficiaries are linked to the Rajshahi-based Nabil Group.
When Prothom Alo reached out to its MD Md Aminul Islam, he
said, "I have been in business for 18 years and there is nothing to
hide. The bank knows everything and they will speak about my
loan."
Now the question is: if these companies do actually belong to Nabil

Group, why were the addresses and company names not given
correctly? Unsurprisingly, Nabil Group is also one of the major
beneficiaries of the SIBL and FSIBL loan.
While the central bank is now investigating the issue and have
halted loans in the name of these shady companies, this incident
has once again exposed the irregularities that ail our financial
sector.
One of the other beneficiaries of the IBBL loans is Chattogram-

based S Alam Group, which controls the bank. While the group's
maximum borrowing entitlement is Tk 215 crore, using its
influence within the board, it has secured loans amounting to Tk
30,000 crore. It is interesting that, recently, a concern of S Alam
Group purchased Ibis Novena Hotel in Singapore for 170 million
Singaporean dollars, which roughly amounts to Tk 1,290 crore.
We should note that the NPL rate in foreign banks operating in the
country stand at about 4.77 percent because of stringent
compliance processes. But while banks and regulators should focus
on strict enforcement of policies, especially with regard to due
diligence before sanctioning loans, they should also ask where this
money is going. Are they being utilised in legal or illegal activities?
Are vested quarters laundering money abroad? To what purpose?
Financial sector reforms necessary to get rid of

default loans
Read more
This is being suggested in the context of increased suspicious

transaction reports (STR) and suspicious activity reports (SAR) –
8,571 to be specific – to the Bangladesh Financial Intelligence Unit
(BFIU) in FY 2021-22, compared to 5,280 such reports in FY 2020-
21. These cases should be thoroughly investigated and the
criminals identified to understand their portfolio, motivations and
transaction patterns. Investigating these reports would also give
the BIFU a clearer picture of suspicious banking transactions and
their correlation with money laundering.
However, none of this will matter if nepotism and corruption in the

banking sector does not end, and the central bank keeps creating
scopes for the banks to window-dress their accounts. Moreover,
NPLs should be defined as per international standards, as
suggested by the IMF – making the NPL ratio a maximum of three
percent – which would put adequate pressure on the banks. Also,
the central bank should revisit its policy to allow individual bank
boards to decide on default loan rescheduling and grant facilities.
Such authority should be vested with the central bank alone if we
want a better grip on bad debts.
It's high time the central bank and relevant authorities ramped up
their activities and updated their policies to bring down bad debts
and curb the defaulted loan ratio. In a situation where Bangladesh
is struggling with depleting forex reserves and a potential liquidity
crisis, there is no other way. The entire nation cannot be allowed to
suffer to fill up the coffers of certain vested groups.
Tasneem Tayeb is a columnist for The Daily Star. Her Twitter

handle is @tasneem_tayeb
Related topic
Bad loans / Banking Sector / banking sector Bangladesh / non-performing loans
/ non-performing loans in Bangladesh / Bangladesh Bank / The central bank /
bad debts / Islami Bank Bangladesh Ltd (IBBL) / money laundering

Bad Debts Going Worse _ the Daily Star

Uploaded by

Copyright:

Available Formats

Bad Debts Going Worse _ the Daily Star

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bad Debts Going Worse _ the Daily Star

Uploaded by

Copyright:

Available Formats

Journalism Without Fear or Favour

TUESDAY, December 6, 2022

Bad debts going worse

M isgovernance, corruption, nepotism and subsequent bad

The IMF, during a recent visit to Bangladesh to negotiate the USD

Destroying the economy to save the thieves

Interestingly, while these discussions between the IMF and

Investigation into the matter revealed that some of the major

Now the question is: if these companies do actually belong to Nabil

One of the other beneficiaries of the IBBL loans is Chattogram-

Financial sector reforms necessary to get rid of

This is being suggested in the context of increased suspicious

However, none of this will matter if nepotism and corruption in the

Tasneem Tayeb is a columnist for The Daily Star. Her Twitter

You might also like