IMF Presses more realistic historic high default loan 11.11% in Bangladesh

The volume of classified loans or non-performing loans (NPLs) in the Bangladesh’s banking sector hit an all-time high at BDT 1.82 trillion or 11.11% of the total loans disbursed in the banking system, according to central bank data at the end of March, 2024.

Bad loans increased by BDT 364 billion in just three months since December 2023, when the volume was reported at BDT 1.46 trillion or 9.0% of the total loans disbursed in the banking system as of December 2023.

Bangladesh central bank’s 17 points action plan road map, announced in February 2024, for reducing non-performing loans (NPLs) in line with conditions set by the International Monetary Fund (IMF) for securing a $4.7 billion loan has significantly contributed to this increase of NPLs. Previously the figures were kept low through relaxed rules and regulations by the concerned authorities.

Some analysts estimate the actual volume of bad loans in the banking sector of Bangladesh as much as BDT 5 lakh crore including the written-off, rescheduled and loans with court injunctions, after the central bank introduced a relaxed loan rescheduling and one-time exit policy for defaulters in 2019.

Under the policy, defaulters were allowed to regularise their loans for 10 years by only paying a 2 percent down payment instead of the existing 10 to 15 percent. And while this was a big benefit for defaulters, it acted as a slap in the face for good borrowers.