The volume of classified loans in the country's banking system jumped by over 26 per cent or Tk 196.08 billion (19,608 crore) in the last calendar year despite close monitoring by the central bank.
The non-performing loans (NPLs) rose to Tk 939.11 billion (93,911 crore) as of December 31 in the last calendar year from Tk 743.03 billion on the same day in 2017, according to the central bank's latest statistics, released on Tuesday
The amount was Tk 621.72 billion as of December 31, 2016.
Stronger recovery drives by the commercial banks and rescheduling of loans before the last parliament election pushed down the volume of default loans in the final quarter (Q4) of 2018, according to sources at the central bank.
During the October-December period of 2018, the classified loans dropped by more than 5.0 per cent or Tk 54.59 billion to Tk 939.11 billion from Tk 993.71 billion in the Q3. The amount was Tk 893.40 billion in the Q2.
"The banks had expedited their recovery drives to improve their balance sheets by the end of the calendar year," BB spokesperson Md. Serajul Islam told the FE while explaining the latest NPL situation.
Mr. Islam, also an executive director of the central bank, said the amount of NPLs dropped in the final quarter of 2018 due to higher recovery before the last general election.
"Written off loans have also helped reduce the volume of NPLs during the period under review," the BB spokesperson noted.
The share of NPLs in the total outstanding loans came down to 10.30 per cent as of December 31 in 2018 from 11.45 per cent three months back. It was 9.31 per cent on December 31, 2017.
The classified loans cover substandard, doubtful and bad/loss portions of total outstanding credit, which stood at Tk 9,114.30 billion on December 31 last. The amount was Tk 7,981.96 billion a year ago.
Senior bankers, however, said several loan irregularities, particularly in the public banks, pushed up the volume of NPLs in the last calendar year.
They also expressed concerns that the amount of NPLs might rise in the first quarter (Q1) of the current calendar year as inspections were being carried out by the central bank.
"A portion of the restructured large loans has already turned into NPLs," M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, told the FE while explaining the main factor behind the increased amount of NPLs in 2018.
The central bank had cleared proposals from 11 business groups for restructuring their large loans amounting to around Tk 153.26 billion.
Some loan irregularities were also exposed that pushed up the aggregate amount of classified loans in the banking system in 2018, according to the senior banker.
Talking to the FE, Syed Mahbubur Rahman, Chairman of the Association of Bankers, Bangladesh (ABB), said the amount of NPLs increased in 2018 as some rescheduled loans along with fresh ones turned classified again.
Mr. Rahman, also MD and CEO of Dhaka Bank Limited, said the overall NPL situation in the banking system might improve in 2019 following coordinated efforts already being made in this connection.
Currently, the ministry of finance, the central bank and the commercial banks are working on how to reduce the amount of NPLs in the banking system.
Echoing Mr. Rahman, Mehmood Husain, MD and CEO of NRB Bank Limited, said the NPLs, particularly in the private commercial banks (PCBs), might decrease slightly in 2019 as they already took a 'cautious stance', guarding against fresh loans turning troubled ones.
The senior banker also suggested expediting recovery drives for reducing the amount of NPLs in the banking system.
"Legal reforms are needed immediately to speed up the recovery process," Mr. Husain explained.
A separate bench of the High Court should be established to deal with only the default loan issues, in addition to setting up multiple Money Loan Courts in the capital and in Chattogram, he added.
The total amount of default loans with the six state-owned commercial banks (SoCBs) rose to Tk 486.96 billion in the Q4 of 2018 from Tk 373.26 billion a year before. The amount was Tk 480.80 billion in the Q3 of 2018.
On the other hand, the total amount of NPLs with the 40 private commercial banks reached Tk 381.40 billion as of December 31 last, from Tk 293.96 billion on the same day of 2017. It was Tk 436.67 billion in the Q3 of 2018.
The classified loans of nine foreign commercial banks (FCBs) rose to Tk 22.88 billion in the Q4 of 2018 from Tk 21.54 billion a year ago. It was Tk 23.82 billion on September 30 last year.
The classified loans with the two development-finance institutions (DFIs) dropped to Tk 47.88 billion as of December 31 last from Tk 54.26 billion a year ago. It was Tk 52.41 billion in the Q3 of 2018.