The actual size of non-performing loans (NPL) in the country's banking system has always been a mystery. The phrase in Hindi, 'jo dekhta hai woh hota nehi aur jo hota hai woh dhekta nehi hai' (whatever appears to the eyes is not actual, and whatever is actual is not visible) does represent the NPL size better as far as Bangladesh is concerned.
The officially shown size of ever-growing NPL was over Tk1.31 trillion until March last. Most people, including many involved with the management of banks, find the amount a window-dressed one. However, there has not been any dearth of guesstimated volumes of NPL.
A noted and Ekushey Award recipient economist Professor Moinul Islam early this week also came out with a guesstimated size of the NPL. Speaking at a discussion meeting in Dhaka, Prof. Islam said classified loans might have ballooned to around Tk 4.0 trillion. His estimate includes the loans that have remained stuck in thousands of loan recovery cases year after year and the ones that the banks have written off over time. The volume of NPL will be even higher if many large loans that are being shown as regular by offering rescheduling facilities time and again under different pretexts are taken into account.
That 'political patronization' has a role in the ballooning of NPL in Bangladesh is more or less a known issue. But none knows its extensiveness. Prof. Islam, quoting from one of his research works, titled "Non-performing loans in the private sector', said political patronization had a role in 77 per cent of default loan cases. His research work results were published before 2010. According to him, the propensity to patronize the defaulters has got further pace in recent times. Most of the defaulted bank money is being transferred abroad illegally.
What the renowned economist has said at the discussion meeting is not anything new. The issues are very often discussed in the public domain and the media do regularly publish news items, reviews and analyses. What is, however, most troubling is that the situation relating to NPL and capital flight has either remained unchanged or deteriorated further.
One may cite lots of reasons for the constant rise in NPL. The banking system of most economies has an NPL problem. But the size matters. When the NPL becomes unsustainable for banks, there should be reasons to be worried. The central bank and the Ministry of Finance are two key players that need to keep vigil over banks so that the situation does not reach a worrying phase. There are questions about whether these two entities in Bangladesh have played their part as per requirement. Had they played their role in compliance with perfectly crafted laws and rules, the issue of political patronage would not have surfaced.
A serious dearth of good governance, accountability and transparency has created a difficult situation in the banking sector. Some people might find the use of the word 'difficult' too soft, as the prevailing state is worse than at any time in the past. The problems in the banking sector have also a direct bearing on the difficulties now the economy is experiencing.
The indifference, deliberate or otherwise, might be making life easy for some high-profile borrowers, but it has invited troubles for the banking sector, particularly for some banks that have been doing business diligently and efficiently. Still, there is time to retrieve the situation. Playing by the rules can help salvage the deteriorating NPL situation.
Zahidmar10@gmail.com
