The default loans of non-bank financial institutions (NBFIs) surged by Tk1,216 crore or 9.34% to Tk14,232 crore in the first quarter (January–March) of the calendar year of 2022 from Tk13,016 crore in the last quarter of 2021, according to the Bangladesh Bank.
It is also 37.45% higher year on year.
At the end of March, the defaulted loans stood at 20.63% of the total loans disbursed by institutions, the central bank's latest Quarterly Financial Stability Assessment Report shows.
Although most of the businesses recovered from the pandemic fallouts and enjoyed different facilities related to loan repayment over the past two years, many of the borrowers seem still reluctant to pay their debts, insiders said.
"The NBFIs also lent money to many shell companies without proper assessment, which is a key reason behind the situation," a central bank official, wishing to remain unnamed, told TBS.
"At least half of the NBFIs are in a bad condition now while many struggle with their 50-90% defaulted loans," he added. "Many borrowers are now delaying loan repayments intentionally.
The total default loans of the sector were Tk10,354 crore at the end of March 2021, which was reduced by only Tk25 crore in the next quarter (April-June). With the withdrawal of the loan repayment facility – which is known as a moratorium – the number of new defaulting customers increased again.
In the July-September quarter, the defaulted loan jumped by Tk1,429 crore to Tk11,757 crore and by Tk1,259 crore to Tk13,016 crore in the October-December quarter.
AB Mirza Azizul Islam, a former financial adviser to a caretaker government, told The Business Standard that increasing defaulted loans is an old habit of borrowers.
"If loan defaulters are repeatedly given benefits and the term of the loan is extended and a one-time instalment facility is given, it will lead to an increase in the list of defaulters."
He further said that to get rid of debt defaulters, effective action should be taken immediately. Failure to do so will result in borrowers taking advantage. "As a result, other borrowers will not be interested in repaying loans."
According to the Central Bank report, the total loan disbursement in the banking sector in December 2021 was Tk13,01,797 crore. The default rate was 7.93%. At the end of March this year, the total debt stood at Tk13,29,735 crore. Of these, defaulted loans stood at 8.53%.