Borrowers do not have much pressure on them at present to pay loan instalments as they are enjoying an eased repayment facility on the basis of bank-customer relationships.
Even then, the amount of defaulted loans in the country's banking sector increased by more than Tk5,000 crore in three months from January to March this year.
At the end of March this year, total default loans stood at Tk94,000 crore or 8.02% of the total outstanding loans, up from Tk88,734 crore or 7.66% of the total outstanding loans at the end of December last year, according to sources at the Bangladesh Bank.
Explaining the reason behind the increase in defaulted loans, a senior official of the central bank told The Business Standard that despite relief in paying instalments, many good clients could not repay loans due to Covid-19, which caused the slight increase in the default loans.
Because of the pandemic, repayment terms were relaxed for all types of borrowers all through last year. This year, the facility has been on offer till June for some specific sectors that too on the basis of bank-customer relationships, as per directives from the Bangladesh Bank.
In other words, if a bank thinks that a client has truly faced losses and has a good track record of repaying loans, only then the borrower will get the facility not to pay installments.
In a recent webinar arranged by The Business Standard, Ali Reza Iftekhar, chairman of the Association of Bankers Bangladesh (ABB) and managing director of Eastern Bank, said bankers are worried about the future situation when installments will have to be paid regularly.
"Businesses are in a downturn now because of Covid-19. So, the next challenge for banks is how much their customers will be able to repay loans or how the banks will recover loans from their clients."
Abul Kashem Khan, chairman of Business Initiative Leading Development (BUILD) and former president of Dhaka Chamber of Commerce and Industry, told The Business Standard, "Sales have declined due to Covid. In such a situation, increasing the amount of debts will not bring about any significant change.
"Buyer demand is now much lower when it comes to buying products or services. As a result, the products of some manufacturers are lying in the warehouse. Or even if they sell them on credit, they are not getting their money back properly. The loan installment is not going to be repaid properly in this situation."
According to him, the new budget should lay emphasis on increasing the buyer demand.
"We need to look at how to give more facilities to good clients without offering any facility to bad customers in terms of repaying loans until the demand increases. Otherwise, the amount of defaulted loans will continue to go up," he concluded.