Presentation on a News/Article

F-602 - Financial Institutions and

Markets

Presented by-
Md. Saniat Islam
ZR1801010

Date: 16 March 2019

CONTENTS
1 •Brief of the Article

2 •Author’s Views

3 •Biasness of Author

4 •Learning from the article

5 •Points to be discussed
Default bank loans:
A potential time bomb

http://thefinancialexpress.com.bd/views/re
views/default-bank-loans-a-potential-time-
bomb-1552403026
Brief of the Article…
Economic Growth
• 6.0% over last 10 years
• 7.0% over last 3 years (according to UNCTAD: five out of 45
least developed countries did the same in 2017)
• Probable: 24th biggest in world economy according to
London-based Centre for Economics and Business Research
(date not mentioned)

Patriotism
• Government has succeeded to silence the monsters of anti-
liberation forces and burgeoning groups of terrorists who
had raised their ugly heads to destabilize the country
…Brief of the Article
The growing volume NPL in billion taka in % of NPL in Terms of
of non-performing year 2017 and 2018 Total Bank Loans
1000 11.00%
loans (NPLs) 500
939.11 10.00%
10.30%
743.03 9.00% 9.31%
(2017: Including TK 191.20 billion rescheduled 0 8.00%
loan) 2017 2018 2017 2018

Classified Loans of SCBs in % of Unrealizable

Increase of the Classified billion TK Classified Loan in Terms
Loans of the SCBs 460
440 of Total Loan of SCBs
438.53
(state-owned commercial banks) 420
400
40%
33%
Janata Bank: Tk 58.18 billion 380
373.26
20%
25% 25%
360
to Tk 172.24 billion 340
0%
DEC-17 JAN-18 FEB-18 MAR-18 APR-18 MAY-18 JUN-18 Sonali Bank Rupali Bank Agrani Bank
within the space of one year.

Government Policy
• Handouts to state owned banks- 2011 to 2018 -- more than Tk 135.00 billion (13,500 crore).
Author’s Views/Opinions…
“it is the best of times, it is the worst of
times, it is the age of wisdom, it is the age
of foolishness”

BEST TIME
• Quantum leap of Bangladesh from the 'bottomless
syndrome' predicted by Henry Kissinger since 1974
• Spirit of Bengali nationalism and liberation war has started
to revive
WORST TIME
• mismanagement of the financial sector
• The phenomenon can be likened to Achilles heel
• True picture of classified loans is also sometime
camouflaged by doctoring the books of accounts, parking
of bad loans to new accounts and frequent rescheduling
…Author’s Views/Opinions

FOOLISHNESS
• Indifferent behavior from former foreign minister
• Former central bank governor focused on unimportant
issues rather controlling recalcitrant banks.
• Although problems area were/are well-known, central
bank did not take action which was necessary.
• Lack of good governance in private banks

WISDOM
• The Prime Minister has chosen Jihad against corruption
• Majority of the people voted for her->strength
Biasness of the Author
Criticized former foreign minister

Criticized Governance

Criticized central bank’s former

governor

Criticized committee of central bank

Learning from the
Article
Classified Loans/NPL:
A classified loan is any bank loan that is in
danger of default. Classified loans have unpaid
interest and principal outstanding, and it is
unclear whether the bank will be able to recoup
the loan proceeds from the borrower. Banks
usually categorize such loans as adversely
classified assets on their books.
[Important: Classified loans have a high rate of
borrower default and can raise the cost of
borrowing for a bank's other customers.]
Source:
https://www.investopedia.com/terms/c/classifie
d-loan.asp
Points to be Discussed

Why and How does Central Bank

frequently change the criteria for
classification of loans?

How long banks can carry the load

of bad loans?/
To what extent our economy can
sustain until the blast of the bomb?