NPLs soar by over 20pc

Lax loan recovery drive to blame

Siddique Islam | Published: September 11, 2018 09:38:15 | Updated: September 21, 2018 11:02:28

Picture used for illustrative purpose only

Despite close monitoring by the central bank, the amount of non-performing loans (NPLs) jumped by over 20 per cent or Tk 150.37 billion at the end of June this year from December last year.

The volume of NPLs rose to Tk 893.40 billion as of June 30, 2018 from Tk 743.03 billion as of December 31 last. The amount of NPLs was Tk 741.48 billion a year ago.

The share of classified loans reached 10.41 per cent of the total outstanding loans during the period under review than that of 9.31 per cent six months back, according to the central bank's latest statistics.

Lax loan recovery drive in the January-March (Q1) period of this calendar year along with turning of some rescheduled credits into classified loan again during the first six months to June this year have pushed up the overall volume of default loans, according to the senior bankers.

Some fresh loans also became NPLs during the period under review, they added.

The senior bankers, however, said the amount of NPLs might fall in the final quarter of this calendar year mainly due to the upcoming national election.

Some banks have already instructed their divisional and branch offices across the country for taking preparations to recover default loans from possible candidates, they explained.

Talking to the FE, Md Serajul Islam, spokesperson of the Bangladesh Bank (BB), said: "We're trying to contain the volume of NPLs continuously."

Mr Islam, also an executive director of the central bank, said the banks will have to take effective measures to reduce classified loans through strengthening their recovery drives.

Another BB official, however, said the amount of NPLs increased slightly in the second quarter (Q2), but the share of classified loans of the total outstanding credits dropped as of June 30.

The volume of NPLs was Tk 885.89 billion in the first quarter (Q1) of this calendar year while it was 10.78 per cent of the total outstanding credits, the BB data showed.

The NPLs cover substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 8,585.21 billion as of June 30 last from Tk 7,981.96 billion as of December 31. It was Tk 8,221.37 billion as of March 31, 2018.

"A portion of restructured large loans has already turned into NPLs that also pushed up the overall volume of classified loans in the banking system," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), told the FE while explaining the upward trend in default loans.

The central bank had cleared proposals of 11 business groups for restructuring their large loans worth around Tk 153.26 billion.

A total of 22 commercial banks had earlier forwarded the proposals to the BB for approving the loan restructuring on behalf of their clients.

Mr Rahman, also managing director (MD) and chief executive officer (CEO) of Dhaka Bank Ltd, said the existing upward trend in NPLs may continue in the Q3 of 2018 but he expects that the volume of default loans may fall slightly by the end of this calendar year.

During the first half of the current calendar year, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to Tk 428.52 billion from Tk 373.26 billion on December 31 last. It was Tk 436.85 billion in the Q1 of 2018.

On the other hand, the total amount of NPLs with 40 private commercial banks (PCBs) reached Tk 389.75 billion as of June 30 last from Tk 293.96 billion in the final quarter of last year. It was Tk 372.89 billion as of March 31 last.

The NPLs from nine foreign commercial banks (FCBs) rose to Tk 22.71 billion during the period under review from Tk 21.54 billion in the Q4 of 2017. It was Tk 21.88 billion in the Q1 of 2018.

The classified loans with two development-finance institutions (DFIs) also came down to Tk 52.41 billion as of June 30 last from Tk 54.26 billion six months ago. It was Tk 54.26 in the Q1 of this calendar year.

Talking to the FE, M A Halim Chowdhury, MD and CEO of Pubali Bank Ltd, said: "Our officials have already started contacting with possible candidates of the upcoming election to recover their default loans."

He also said one or two classified loans have already been recovered from possible candidates.



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