While the Hall-Mark loan scam will probably go down in Bangladesh's financial history as the single largest siphoning off of funds from a State-owned bank (SCBs), data published by the central bank (BB) for the last quarter (July September) reveals something alarming. The amount of bad loans up to June 30 stood at Tk29,000 crore. Yet, on September 30, this figure had shot up to Tk36,282 crore, a 1.58 per cent increase.
What is interesting to note here is that the largest segment of these bad loans belonged to SCBs. Bad loans have been increasing from various sectors that include manufacturing, real estate and ship breaking industry. All this has adversely affected bank profitability in the last quarter. These anomalies were discovered by BB which has been fighting a not so successful battle to have banks classify the loans.
Incidence of forged documentation has been detected in more than one SCB and private commercial bank, but the granting of loans continues. So the question arises, why have banks not complied with BB demands to classify these loans? And why it should take up to December, i.e. another financial quarter to put them into the books as classified loans? Are we then to infer that by letting time pass by, we may be looking the other way so that more bad loans may accrue?
What has become obvious is that our banking sector is not in good shape. According to BB data, many banks have not followed correct credit risk analysis properly prior to loan sanctioning. Naturally, a bulk of these has gone bad. Despite being armed with such dismal facts, banks have failed to treat the matter of loan recovery with due diligence. With Hall-Mark scandal yet to become a distant memory, it is simply incomprehensible to find laxity of controls being exercised by bankers today that allowed for the Hall-Mark scam to happen in the first place. We urge BB to rein in the deterioration in the banking sector while there is still time, to prevent our very own version of the 'global financial meltdown'.