A startling Tk50,186 crore loans were rescheduled in the last one year, more than one-third of it under the latest relaxed exit offer for defaulters that ends on February 16, to push the total soured loan figure down to a four-year low.
And if this huge rescheduled loans are taken into consideration, then the shine goes off the latest default loan figure until December.
The December figure says default loan came down to 9.19 percent from a decade-high 12 percent in September that raised concerns among economists about the health of the financial sector.
Following this, the government made a controversial rescheduling offer, saying that a defaulter can regularise their loans for ten years by paying only a two percent down payment. The defaulter will also be charged only nine percent interest rate.
But now the country's total accumulated rescheduled loans including the last one year's huge amount stand at Tk65,000 crore.
This means if this amount is considered, the country's default loan would shoot up to 16.49 percent of September's total loan. This is exactly what the International Monetary Fund (IMF) has recently pointed out.
In its Financial Sector Stability Review on Bangladesh, the IMF commented that the actual size of bad loans is more than double the officially recognised figure.
The figure will be much more than the official data if loans remained unclassified taking stay order from the High Court and rescheduled amount is counted, according to the IMF.
Dr AB Mirza Azizul Islam, former finance adviser to the caretaker government, explained to The Business Standard how the new rescheduling policy is going to create new pressure on banks.
"The repayment of the rescheduled amount will be very slow due to the two percent down payment requirement and the long tenure of repayment. This will aggregate liquidity pressure on the banks," he said.
Some banks are already facing liquidity pressure and if loans are stuck up for long, this will intensify the liquidity crisis, squeezing lending to the private sector, he added.
"Private sector credit growth remained in downward trend and further liquidity crisis will stagnate private investment which will ultimately hit the country's expected economic growth," Azizul opined.
There is also uncertainty about regularity of payment of rescheduled loans, said Mohammed Nurul Amin, former chairman of the Association of Bankers, Bangladesh.
It is because previous large borrowers who restructured loans under special package turned defaulters again putting more burden on the banking sector, he said.
Nurul said if new rescheduling policy does not work, it will create a disaster for the banking sector by adding to fresh default loans.
The total default loan stood at Tk94,422 crore in December, according to the Bangladesh Bank data.
The cause for concern is that the rescheduled loans are being further defaulted on at a faster rate.
Last year, 26.47 percent of rescheduled loans turned into further default, the central bank data show.
Of the total loan that was rescheduled last year, 37 percent or Tk18,584 crore was regularised under one-time exit policy offered by the government at discounted down payment. The remaining amount was regularised under the regular policy.
In November last year, the High Court cleared the implementation of the policy, extending the deadline for three more months to avail the one-time exit policy until February 16.
This special policy intensified the loan rescheduling spree, helping the banking sector to clean up default loans of Tk22,000 crore only in three months until December last year.
Though banks experienced substantial improvement in their default loan status, it brought them meagre benefits as cash recovery was very small last year.
The banks managed to recover only Tk478 crore through the two percent down payment which was less than one percent of the total rescheduled amount last year.