Although the volume of default loans in Bangladesh is proportionally lower than that in many countries in the region, some research organisations are trying to show them as being high, said Bangladesh Bank Governor Fazle Kabir.
Different research firms consider rescheduled and written-off loans as default loans, and thus try to show that there is a high volume of bad loans, he said while addressing the annual conference of Sonali Bank at the Bangabandhu International Conference Centre on Wednesday.
Finance Minister AHM Mustafa Kamal attended the event as chief guest, and Ataur Rahman Prodhan, managing director of the bank, presided over the event.
Fazle Kabir said Bangladesh's default loan is now at 9.32 percent, which is comparatively low in this region. But this figure was higher, at around 11.9 percent in September because of pending cases at the High Court over the special loan rescheduling policy.
He defended that the loan rescheduling is a regular process, and that loans were rescheduled following the rules.
In its Financial Sector Stability Review on Bangladesh, the International Monetary Fund (IMF) commented that the actual size of bad loans is more than double the officially recognised figure.
The figure will be much higher than the official estimate if one takes into account the loans that have remained unclassified by taking a stay order from the High Court, and the rescheduled amount is counted, according to the IMF.
Loans worth a startling Tk50,186 crore were rescheduled in the last one year, more than one-third of them under the latest relaxed offer for defaulters that ended on February 16, to push the total soured loan figure down to a four-year low.
But now the country's total accumulated rescheduled loans, including the last one year's huge amount, stands at Tk65,000 crore.
The December figure says default loans came down to 9.19 percent from a decade-high 12 percent in September that raised concern among economists about the health of the financial sector.
And if this huge volume rescheduled loans are taken into consideration, default loans would shoot up to 16.49 percent of September's total loans. This is exactly what the IMF has recently pointed out.
Global economic growth is already feared to be halved due to an escalation of the coronavirus outbreak, which will also have an impact on the import-export business of Bangladesh, said Ziaul Hasan Siddiqui, chairman of Sonali Bank.
The fall in import-export trade will also put pressure on banks' earnings, he said.
Moreover, interest rate cap is another challenge for continuing income growth because when interest rate is the same for all, banks will have to differentiate themselves by improving service quality, he added.
The Bangladesh Bank recently issued a circular asking all banks to implement single-digit lending rates from April 1.
Siddiqui said Sonali Bank will emphasise the development of technology and human resources to face the challenges.
The bank is planning to introduce mobile financial services and agent banking to diversify the businesses, he added.
Sonali is the first among the state owned banks that will introduce a mobile app on March 17 to give its customers easy access to their accounts, he said.
The non-performing loans of the bank declined to 21.55 percent in December 2019 from above 30 percent in the previous year, the annual report of the bank shows.
The decline in non-performing loans helped the bank reduce capital shortfall to Tk2,056 crore last year from Tk5,032 crore in the previous year.
The special loan rescheduling policy at 2 percent down payment offered by the government helped the bank cut non-performing loans significantly, said Ataur Rahman Prodhan.
He said the bank has reduced Tk3,000 crore default loans under the policy.
The bank made the highest profit among the state-owned banks this year, he said. But it has been making a huge loss from LC (Letter of Credit) opening of government organisations.
Sonali Bank incurred a loss of Tk1,500 crore by opening LCs in favour of government organisations at lower than market price.
The total income of the bank declined slightly by 2 percent to Tk7,683 crore last year, according to annual report of the bank.
The bank has a target to earn Tk8,945 crore this year, 16.42 percent higher than the target last year.