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What are the current challenges of the banking sector in Bangladesh? Give your specific recommendations how to reduce non-performing loans.

Created: 1 year ago | Updated: 11 months ago

Challenges of the banking sector in Bangladesh: Several challenges have been curbed the banking sector. Liquidity crisis, default loans, absence of good governance in the banking sector is now a hot topic. Total defaulted loan is approximately 10 percent of total advances. This is just horrible for the growth and development of the banking sector.

State-run banks are fervently rescheduling loans with a view to flattering their true financial health. In 2017, Sonali, Janata, Agrani, Rupali and BASIC rescheduled loans amounting to about Tk 5,000 crore, in contrast to Tk 3,300 crore a year earlier, according to data from the central bank. Janata regularised the highest amount of loans: Tk 1,433 crore. As a result, the bank's default loan ratio came down to 14.10 percent at the end of last year from 16.14 percent in 2016. The bank's other financial indicators though deteriorated during the course of 2017. At the end of last year, it had a capital shortfall of Tk 161.48 crore, which was Tk 278 crore surplus in the previous year. Janata's net profit too plummeted 1.6 times to Tk 96.77 crore in 2017 from Tk 260.55 crore from the previous year. Agrani rescheduled the next highest amount of loans in 2017: Tk 1,288 crore. In 2016, it had rescheduled Tk 540 crore.

Defaulted and written-off loans have simultaneously been increasing the recent years on the back of banks' failure to prevent scams. Many banks tend to write off large amounts of default loans in the final quarter of a year to show a clean balance sheet. It is an unethical practice. The banks disburse the loans by taking deposits from general clients, meaning the depositors' money is not ultimately showed in the banks' financial statements due to the practice. Written-off loans are like uncollectible loans - the recovery of such loans is highly difficult. Banks' writing off loans to clean up balance sheets is a common practice globally.

The recovery of such loans has become almost insurmountable as banks do not keep adequate collateral or take proper documentation from borrowers. For instance, some unscrupulous borrowers kept the same property as collateral in different banks. The disbursed loans have subsequently become defaulted and were written off. But a strong judicial system will help banks recover the written-off loans from defaulters.

Recommendations for reducing non performing loans:

The non-performing loans of the state owned commercial banks and private commercial banks continue to soar. According to the latest central bank data, the volume of the non-performing loans or default loans in the banking sector is now Tk. 800 billion. Such non-performing loans of Agrani Rupali, Sonali, Janata, BASIC, BKB, RAKUB & BDBL stood at Tk. 491.12 billion at the end of March 2018 which is 14.88% more than that of the previous quarter. Of the eight state owned commercial banks, Sonali Bank had the highest amount of default loans at the end of March Tk. 143.05 billion. It was followed by Janata Bank and Agrani Bank Tk. 970.2 billion and Tk. 567.6 billion respectively.

To get rid of the bulk amount of non-performing loans in the banking sector, banks normally keep requisite provisions against their unclassified and non-performing loans from their operating profits in a bid to reduce financial risks. To expedite the loan recovery process, the bank should develop an in-build capacity. The banks may consider appointment of loan recovery agents. But it will not work if the banks sanction a huge amount of loan even after knowing that those loans would became classified. As many bank officials got involved in major irregularities while sanctioning these loans, so it primarily seems impossible to get rid from this loan default culture. But this bad culture can not go on for the longer period. So the central bank should give a strict timeframe to the banks to recover the amount from the defaulters. They should not be allowed to rescheduled or restructure the loans if they fail to recover the amount within the given period.

Besides those above mentioned measures, the government should come forward to mitigate the non- performing loans in the banking sector. By this process, government should stop recapitalizing the banks which are in danger as it has not brought any improvement in the bank's financial health. All state-owned public and private commercial banks should be forbidden from sanctioning fresh loans to habitual defaulters.

11 months ago

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9 months ago

Cluster Villages

 

A majority of the Bangladesh population are farmers who are settled in villages. They toil to make both ends meet and produce crops for the entire nation. Bangladesh has about 68,000 villages, which are scattered throughout the country.  A village is called the rural part of the country. It is called rural because it does not have modern facilities like cities. The main occupation of the villagers is farming. They are the primary source of the nation's agricultural production.

 

Description of Villages

Villages have either tiny hamlets of thatched huts or large settlements of tiled roofs, stones, and brick homes. An impression has been created by artists and filmmakers that an Indian village is a simple cluster of mud-plastered walls, shaded by trees, overlooking the large expanses of green fields with a few people moving slowly and of course, bullock carts. They portray a village woman with a pot on her head and walking gracefully, her skirt swaying gently. The reality is that a village is the hub of nonstop activity, with their stronger work ethics. Agriculture is tough and requires hard work. The villagers work very hard and are always trying to find innovative methods of growing wheat, rice, and lentils. 

 

Importance of Village

The village is important because it is the primary sector of agricultural production for our country. The village is the backbone of Bangladesh economy. It also plays a major role in maintaining the ecological balance of the environment. Villages are mostly covered with trees and plants. They are covered with green grasslands. One can see acres of green fields as far as the eyes could see. They provide shelter to many animals. 

Life in Village

The village life is full of contentment and happiness, as people are not in a hurry like in city life. Village people live a very simple life. Villages are mostly situated far from the hustle and bustle of urban civilization. The beauty of nature can be experienced in a village as it is surrounded by trees, flowers, mountains, streams, and farmlands. There is no pollution in the village and one can feel the freshness in the breeze. The demands of the villagers are not too high but they are still deprived of basic facilities. Clean drinking water, electricity, health center, schools, proper sanitation are a few facilities that are lacking in the villages. Their poverty is always visible in the atmosphere. 

Conclusion

My village is a small abode for happy people.  Here they live in harmony and peace. The village people are very hardworking and thus they must have a good source of upliftment. Like the village’s schools and clinics should be maintained and increased in number. The farmers should be facilitated by helping them to leverage their sales, make them notified about the modern techniques used in farming, and give them compensation and knowledge of the true market price of their crops. Thus, I would request governmental authorities to come forward and uplift the medical, educational, and farming facilities in the village.

9 months ago

Problems of urban living in Bangladesh

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Urbanization have crucial role to play in the economic development of Bangladesh. The circumstances under which population in Dhaka and Chittagong are growing without proportionate infrastructural development will begin to wipe out most of the gains associated with urbanization. That is, relative high levels of urbanization may not be sufficient to ensure higher levels of economic welfare in Bangladesh. This has happened in Latin America with levels of urbanization, above 80%, yet with real per capita incomes about a third that of developed nations. It could happen in Bangladesh as well unless the urban managers rise from their prolonged slumber.

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My school life has been full of different experiences over the years. It gave various opportunities to develop not only my scholastic abilities but also the art and sport side. It supported me in my sports as well as exposed me to numerous types of people. All of this accounted to make me understand how to behave socially and in building a personality which I have today.

There are numerous things that make school life the best phase in one’s life. All of this eventually is because we are young to do mistakes again and again till we realize, dumb enough to not think about people and do what we feel like doing, curious to know everything we can and most importantly still not exposed and contaminated with the evil feelings of this world. And all of this makes us build a personality of our own.

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