The default loan of the country's commercial banks has increased by .63 percentage point or Tk 511 crore in the first quarter of the current year.

As of December 2004, the total default loan stood at Tk 18,726 crore or 17 percent of the total outstanding loan, which in March 2005 rose to Tk 19,237 crore or 17.63 percent.

Explaining the rise, a commercial bank official said, though the banks typically try hard to recover classified loans ahead of the year-end, the drive somewhat eases off in the first few months of the new year, resulting in an inflated volume of default loans.

Of the four types of banks, only the Development Financial Institutions (DFIs) could avoid this default loan increment. The remaining three -- Nationalised Commercial Banks (NCBs), Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs) experienced this surge.

The amount of default loan in the four NCBs has risen by Tk 422 crore over the first quarter to stand at Tk 10,377 crore.

An official of Sonali Bank, the largest NCB, said, "No new loan has turned into default loan. Actually, the regular interest on the existing default loans has pushed the figure up."

Besides, in line with a government decision, recovery of agriculture loans has been suspended because of the last year's floods. But 40 percent of Sonali Bank's default loans are agricultural, he pointed out, adding this is also a major reason why the default loans of the NCBs have increased.

Default loans of most of the 30 PCBs have risen in the January-March quarter, bumping the total amount up by Tk 435 crore to Tk 4,629 crore, sources said.

In case of the FCBs, the default amount rose by Tk 25 crore in the first quarter, bringing it to Tk 133 crore at the end of March.

Pubali Bank Managing Director Khondkar Ibrahim Khaled said, "This trend of rise in default loans in the first quarter of a year is not unusual. It will go down in most banks by June."

As an instance, he said, although the default loan was high in March 2004 in his bank, by the end of April it came down even below the level of December 2003.

The DFIs however show a reverse trend. In the last quarter, their default loans have actually decreased by Tk 371 crore to stand at Tk 4,096 crore at end-March.