The central bank has streamlined loan classification reporting format for non-banking financial institutions (NBFIs) - aiming to curb the rising trend of stressed assets through strengthening monitoring, officials said.
The stressed assets cover non-performing loans (NPLs) as well as restructured and rescheduled credits in the NBFIs sector.
Under the streamlining initiatives, the NBFIs will have to submit returns for classification of loans or leases separately, instead of the previous joint one, to the central bank on quarterly basis, according to a notification, issued by the Bangladesh Bank (BB) on Monday.
In that case, returns for classification of loans or leases for both long-term and short-term, housing finance, subsidiaries and staff will be submitted to the BB as per prescribed format.
"We've streamlined loan classification reporting format for the NBFIs to strengthen monitoring on the sector," a BB senior official told the FE.
The streamlining of reporting process will facilitate scrutinizing real credit flow that will also help reduce the amount of stressed assets in the sector, according to the central banker.
"It will help ensure accountability and transparency in the NBFIs sector," Md. Golam Sarwar Bhuiyan, vice chairman of the Bangladesh Leasing and Finance Companies Association (BLFCA), told the FE in his initial reaction.
The BB's latest moves came against the backdrop of rising trend in NPLs in the NBFIs in recent months despite loan moratorium facility in 2020.
The volume of classified loans in the country's NBFIs jumped by over 57 per cent to Tk 100.54 billion as on December 31, 2020, from Tk 63.99 billion on the same day in 2019. It was Tk 89.06 billion as on June 30, 2020.
"The volume of NPLs increased in 2020, as initially some NBFIs did not report to the central bank properly," the BB official said while explaining the rising trend of NPLs.
"We expect that the amount of classified loans in the NBFIs will fall during the first quarter of 2021," he noted.
Talking to the FE, Md Nurul Amin, chairman of FAS Finance and Investment Limited, said higher interest rates on lending pushed up the volume of NPLs in the NBFIs in 2020.
Echoing the BB official, Mr. Amin, also former chairman of the Association of Bankers, Bangladesh (ABB), said the volume of NPLs in the NBFIs may fall slightly during the January-March period of this calendar year.
Actually, the NBFIs were not allowed to classify loans or leases adversely until December 31, 2020, in line with the BB's directives.
Earlier, the central bank asked the NBFIs not to be harsh while classifying loans - to help businessmen offset adverse impact of the Covid-19 pandemic on their businesses.
Besides, Proshanta Kumar Halder, also known as P K Halder, former managing director of Reliance Finance Limited, allegedly embezzled about Tk 35 billion from four NBFIs, creating a haphazard situation for the entire NBFI sector of Bangladesh.