IMF airs concern over soaring soured loans

Better BoP hinges on diversified exports, it says

Siddique Islam | Published: June 27, 2019 09:36:25 | Updated: June 27, 2019 13:21:25

The International Monetary Fund logo is seen during the IMF/World Bank spring meetings in Washington, April 21, 2017. Reuters/Files

The International Monetary Fund (IMF) has expressed concern over the rising trend in non-performing loans (NPLs) in the country's banking sector.

The Washington-based lender also intended to learn about the banks' plan to downsize their volume of classified loans in the near future.

The Fund's concern came at a meeting with senior officials of Pubali Bank Limited, held at its headquarters in Dhaka on Wednesday, according to bankers.

In the meeting, the team wanted to know how publicly-owned Pubali Bank transformed itself into a private bank and ensured good governance.

The meeting was presided over by M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of the bank. Other senior officials also attended.

A seven-member IMF Article IV consultation mission, led by Daisaku Kihara, division chief, South Asia 2 Division, Asia and Pacific Department, of the Fund took part in the meeting.

The IMF's latest observations came against backdrop of rising trend in the classified loans in the banking sector, despite close monitoring by the central bank.

The volume of NPLs climbed by more than 18 per cent to Tk 1,108.73 billion in the first quarter (Q1) of the year from Tk 939.11 billion in the earlier quarter, according to figures available with the central bank.

The share of NPLs also rose to 11.87 per cent of the total outstanding loans in the Q1 of 2019 from 10.30 per cent in the previous quarter.

Also, the classified loans that cover substandard, doubtful and bad/loss of total outstanding credit stood at Tk 9,337.27 billion as on March 31. It was Tk 9,114.30 billion three months before.

In the meeting, the private bankers said they have maintained a series of measures, including the third party valuation of assets, which has been used as collateral against the loans.

They have also checked real commodities prices in the global market using different mechanisms and ensuring verification before sanctioning any loans to curb the NPLs.

As a result, the percentage of classified loans of the private lender stood at 5.6 per cent in the Q1 of this calendar year while the share of NPLs reached 11.87 per cent of the total outstanding loans, the bank officials told the meeting.

The mission has also met senior officials of a leading foreign commercial bank as part of their assessment process.

Meanwhile, the IMF mission has suggested improvement in the country's overall balance of payment (BoP) situation through export diversification.

The global lender recommended that the apparel makers take effective measures to produce high-end products gradually from the existing basic items for boosting income.

The IMF team also stressed the need for increasing the tax-GDP (gross domestic product) ratio through modernisation of the existing tax system, officials said.

The visiting mission made the suggestions at the meeting with the Bangladesh Bank (BB) chaired by BB governor Fazle Kabir.


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