Non-performing loans of financial institutions in Bangladesh increased to Tk 24,711 crore, one-third of total loans
Non-performing loans of financial institutions in Bangladesh increased to Tk 24,711 crore, one-third of total loans
The amount of non-banking financial institutions (NBFIs) in the country has increased to Tk 24,711 crore, which is 33.15 percent of the total disbursed loans till June this year.
According to the data of Bangladesh Bank, at the end of March, the amount of defaulted loans in this sector was 23 thousand 889 crores, which is 32 percent of the total loans.
Bangladesh Bank has allowed NBFIs to set interest rates based on market conditions. Earlier, the interest rate of the institutions of this sector was determined by ‘Six Months Moving Average Rate of Treasury Bill’ or SMART method.
As a result of stricter monitoring than before, the number of defaulted loans in this sector is believed to have increased as the cases of NBFIs’ loan irregularities have come to light. It is feared that the amount of defaulted loans may increase further in the next few quarters.
According to Bangladesh Bank’s Financial Stability Report 2023, the amount of non-performing loans in the NBFI sector has been steadily increasing since 2019. In 2019, the amount of defaulted loans in this sector was 9.53 percent, in 2023 it increased to 29.27 percent.
A managing director of a financial institution told The Business Standard, ‘Currently many financial institutions are suffering from liquidity crisis. Because the image of many institutions is damaged due to various irregularities, it is difficult to get deposits. Due to non-availability of deposits, new loan disbursements are decreasing. And the previous loans which are being rescheduled for a long time, are now being defaulted.
Besides, many borrowers could not repay their loans on time due to the bad business of the borrowers. Therefore, the defaulted loans of financial institutions are gradually increasing,’ he said.
According to the central bank report, by the end of 2023, more than 12 of the 34 financial institutions have defaulted on more than 30 percent of their loans. Some institutions have a default rate of 50 percent to 90 percent.
Such high non-performing loans have had a significant negative impact on the overall profitability of the NBFI sector. The sector posted a total pre-tax loss of Tk 1,284 crore in December 2023, which is Tk 400 crore more than the previous year. Also during this period other operating income decreased by 13.37 percent.
At the end of December 2023, the net profit of this sector has further decreased compared to the same period of 2022.
