Hunt is on for way to ease NPL pressure

The central bank is trying to find a way out to ease pressure of defaulted loans that have already reached an alarming level in the country's banking system.

It has already formed three committees to prepare a set of recommendations for amending three relevant pieces of law and regulations to help reduce the volume of classified loans.

They are now working to submit the recommendations to the finance ministry for amending the Banking Companies Act, Bankruptcy Act and Negotiable Instrument Act along with Merger and Acquisition (M&A) regulation.

"We've already started work to prepare recommendations in line with the requirements of the authorities concerned," a committee member told the FE on Tuesday.

The committees are trying to submit their recommendations to the authorities as early as possible, he said.

The Bangladesh Bank (BB) aims to recover non-performing loans (NPLs), particularly from the wilful ones, through reforming the existing acts and regulations.

To this end, officials said, a special meeting is scheduled to be held at the BB headquarters today (Wednesday) with BB Governor Fazle Kabir in the chair.

All managing directors and chief executive officers of banks have been invited to the meeting to highlight problems, particularly legal ones, in recovering defaulted loans.

Law Commission Chairman ABM Khairul Haque and Bangladesh International Arbitration Centre CEO Muhammad A (Rumee) Ali are expected to attend the meeting, they added.

They would help explore legal measures with a view to preventing habitual defaulters.

"We want to gear up legal processes for recovering defaulted loans," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, told the FE in reply to a query about legal measures.

Senior bankers will also discuss how to expedite alternative dispute resolution (ADR) system under Artha Rin Adalats Act (Money Loan Courts Act) at the meeting to help settle of loan disputes, he said.

The BB's latest moves came against the backdrop of a rising trend in loan defaults in the country's banking system in recent months.

The share of defaulted loans reached 11.45 per cent at the end of September 2018 after registering at 10 per cent during the period between 2013 and 2017, which is alarming, the BB said in a document.

The volume of NPLs jumped by nearly 34 per cent or Tk 250.67 billion to Tk 993.70 billion as on September 30, 2018, from Tk 743.03 billion as on December 31, 2017, according to the BB data.

The share of classified loans also rose to 11.45 per cent of the total outstanding loans in September 2018 from 9.31 per cent in December 2017.

The defaulted loans include substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 8,680.07 billion as on September 30, 2018, from Tk 7,981.96 billion as on December 31, 2017.

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