Analysts again sounded the alarm on the government’s lack of will to arrest bad loans which, according to the International Monetary Fund, stood at Tk 240, 167 crore as of June. Although still extremely worrying, the government’s figure is much less than that but mainly because it has repeatedly eased policies for loan classification and rescheduling to artificially bring defaulted loans down on paper. And herein lies the problem—reducing it on paper doesn’t actually bring defaulted loans down. And if anything, continued refusal to admit the true extent of the problem over the years has only aggravated it.
We have been talking about acknowledging this problem ad nauseum. There are basically two groups of defaulted loans—one that has been acknowledged and the other that has remained hidden. As analysts explained, the second group doesn’t come up as bad loans since defaulters have been “fixing” the system in one way or another. Therefore, the acknowledged part is only half the amount of actual defaulted loans in the country. This reality poses grave dangers not only for the banking sector, but the country’s economy as a whole.
As has been revealed through various newspaper reports, a handful of defaulters are responsible for an overwhelming amount of all bad loans. And most of them are wilful defaulters who are politically connected or are themselves part of the government machinery—and those who know they can get away with it, according to IMF. That is why the government’s decision to repeatedly bend the rule for the sake of a handful of wilful defaulters perhaps comes as less of a surprise. Nevertheless, the decision by the regulators to allow these people to get away with defaulting on their loans has only encouraged such practices, leaving the banking sector now on the brink of disaster.
The practice of playing such games with public money should be stopped immediately. The authorities need to recognise the hole it is digging our entire economy into before the damage being done becomes irreversible.