Defaulters absorb bank profit
Published: 04:52 PM, 30 July 2019 Updated: 04:53 PM, 30 July 2019
Drawing: Anis Mamun
The amount of deferred debt is increasing every year. As a result, the real profits of the banks are also waning. Although the bank's operating profit has increased over the past six months, the net profit will not be the same after the incidental liabilities and expenses, said, bankers. At the same time, experts have advised the government to take a tougher stance on defaulted loans.
According to the latest data provided by Bangladesh Bank, the amount of defaulted loan in the bank sector has risen to Tk 1 lakh 10 thousand and 873 crores at the end of March this year; which is 11.87 percent of the total disbursed loan. The bank has to secure a large number of security provisions against the defaulted loan. If there is no defaulted loan, the profit will increase even more.
Bangladesh Bank said in a report on defaulted loans issued by the High Court, that the amount of defaulted loan of the bank in the last 20 years is Tk 2 lakh and 20 thousand crore. Of this, the receivable loan is Tk 1 lakh 10 thousand crore. Tk 80 thousand crore has been imposed on various court orders and Tk 30 thousand crore has been writing off. The central bank has said that the loan has been taken from various banks through10 thousand and 476 accounts.
Bangladesh Bank’s former Governor, Dr. Saleh Uddin Ahmed said, “This is the time to compete. Some banks have been seen aggressive in distributing loans to survive the competition. Many are providing loans without checking. As a result, the amount of defaulted loans has been increased.”
Dr. Saleh Uddin expressed doubt about the effectiveness of the central bank's recent initiatives on debt consolidation. He also commented that there was no alternative to being strict to reduce deferred debt.
It has been reported that due to irregularities, corruption, and mismanagement of the banks, deferred debt has been increased. As a result, the liquidity crisis is also prevalent in many banks. Debt growth has been declining constantly. There is no discipline in the interest of deposits and loans. The dollar market is also volatile. All this has impacted operating profit for the first six months (January-June) of this year.
Most of the private banks in the country are listed on the capital markets. Every quarter (intervals of three months) banks submit their unsubsidized financial reports to the Central Bank, the capital markets regulatory body, Bangladesh Securities and Exchange Commission (BSEC) and two stock exchanges. As a rule, banks cannot formally disclose this information before submitting it to the stock exchange.
Analyzing the data found in the bank's operating profit from various sources shows that most of the bank's operating profit increased in the first six months of this year. However, it did not go as expected. According to the bank concerned, a large part of the operating profit of the banks came from commissions, service charges, and import-export earnings. The main interest of the bank is the interest of the loan, but this time the income from this sector is very low.
It is reported that at the end of June 2019, the operating profit of Islami Bank has been reached at Tk 1,223 crore, Tk 295 crore of Social Islami Bank, Tk.282 crore of First Security Islami Bank, Tk. 405 crore of Al-Arafah Islami Bank, Shahjalal Islami Bank of Bangladesh Tk 320 crore, Tk 330 crore of Exim Bank, Premier Bank Tk 264 crore, 405 crore South East Bank, Tk 510 crore of Dutch Bangla Bank. Tk 331 crore of Mercantile Bank, Tk 300 crore of Dhaka Bank, Tk 273 crore of Mutual Trust Bank, Tk 268 crore of National Bank Tk 362 crore of NCC Bank, Tk 465 crore of Bank Asia, Tk 297 crore of IFIC Bank, Tk 311 crore of Jamuna Bank. Tk 98 Crore of Madhumati Bank Tk 90 crore of NRBC Bank, Tk 190 crore of South Bengal Agriculture and Commerce Bank, Tk 65 crore of Midland Bank and Tk 45 crore from Meghna Bank.
Provisions should be made against bank loans and defaulted loans from the management profits that banks have made. The amount of provision will increase more than the bank's deferred loan amount and the loss of investment by investing in the capital market. As a result, the net profit of the banks will be reduced.
Former caretaker government adviser AB Mirza Azizul Islam told the DailyBangladesh, that the huge debt had been defused in the long run. He thinks there are political liabilities like the failure of the banks. But he warned that the trend would have terrible consequences for the country's economic sector.
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