Monopolising loan defaults

The finance minister’s revelation in parliament that half of all the defaulted bank loans in Bangladesh was held by 0.17 percent of borrowers, is simply astonishing. Total bad loans now stand at a whopping Tk 1 lakh crore and the number of total defaulters at 1.7 lakh. Compare that with the fact that 0.17 percent of those 1.7 lakh loan defaulters hold Tk 50,942 crore out of the Tk 1 lakh crore of bad loans, and you get a picture of how poorly the banking sector is functioning.

When less than 1 percent of defaulters hold such a large portion of all defaulted loans, what that tells us is that the culture of loan default has not been created by these borrowers alone, but because banks have granted such absurd amounts of loans to them, despite their woeful track records. Additionally, habitual defaulters have not been stopped by policymakers either. In fact, by constantly bailing out banks that gave such loans—either through bad judgement or because of corruption—policymakers have encouraged this culture to form.

A number of banks have reportedly reached a point where close to a 100 percent of their loans have become bad loans. The money that they lent out is not theirs, but belongs to their depositors. How is it then that these banks have written off loans at will as if the money was the personal property of their owners or directors? And why is it that the regulators did not take any action to protect the interest of the depositors? Isn’t that what regulators are there for?

As experts have said, publishing the names of these defaulters is not enough—especially when done selectively, and some names are withheld. Banks must stop writing off loans and be made to recover the money by the government. Anything short of that could prove disastrous for the sector and the economy as a whole.