Troubled banks face Tk1,663.38cr losses for banking system abuse: Experts

Bangladesh's banking sector is grappling with bad loans and significant losses, despite once being a consistently profitable industry.

The latest quarterly financial reports reveal that nine banks collectively lost Tk1,663.38 crore in the first quarter of the fiscal year 2024-25.

According to economist Prof Abu Ahmed, unchecked corruption, misuse of regulatory frameworks and the appointment of dishonest and unskilled people to key positions have contributed to the current turmoil.

"These banks were profitable before the past fascist government abused the banking system. A large amount of money deposited by ordinary citizens was looted, leading to the current crisis," he said.

Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), highlighted that substantial funds had been misappropriated through fake documents. "This looting has resulted in massive losses for the banks," he noted.

Bangladesh Bank has initiated a taskforce and is in the process of appointing international audit firms to evaluate the assets of various banks.

Preliminary investigations by the central bank indicate that after 2017, a significant volume of loans was issued against fraudulent documents to paper-based companies affiliated with the S. Alam Group and their associates.

The misappropriated funds were reportedly laundered to countries such as Singapore, the UK, the USA, Canada, and other European nations. Consequently, many banks are struggling to meet their clients' demands and are facing operational losses in the July-September quarter.

The central bank's report identifies National Bank, Exim Bank, Bank Asia, Islami Bank Bangladesh, Union Bank, Al-Arafah Islami Bank, First Security Islami Bank, Social Islami Bank and ICB Islamic Bank as having incurred losses amounting to Tk1,663.38 crore during this period.

The profits of ten other banks, including AB Bank, Midland Bank, Rupali Bank, IFIC Bank, NRB Bank, Dhaka Bank, Dutch-Bangla Bank, Southeast Bank, Premier Bank, and Eastern Bank, have also declined compared to the same period in the previous year.

National Bank posted the highest loss, reporting a post-tax deficit of Tk699.47 crore in the July-September quarter, an increase of Tk201.96 crore or 40% from the same period last year.

Exim Bank reported a post-tax loss of Tk566.3 crore, a drastic shift from a profit of Tk533.9 crore in the same period of 2023—a decrease of Tk619.42 crore.

Bank Asia recorded a loss of Tk103.13 crore, compared to a profit of Tk277.4 crore the previous year, marking a decrease of Tk130.88 crore.

Similarly, Islami Bank faced a loss of Tk89.2 crore, down from a profit of Tk94.4 crore last year, reflecting a decline of Tk183.67 crore or 194%.

Union Bank reported a loss of Tk80.18 crore, a stark contrast to its Tk52.8 crore profit in the same period of 2023, representing a drop of Tk132.98 crore or 252%.

Other banks, including Al-Arafah Islami Bank, First Security Islami Bank, Social Islami Bank, and ICB Islamic Bank, also experienced notable declines in their profits or increased losses.