The volume of non-performing loans (NPLs) jumped by over 19 per cent or Tk 119.76 billion at the end of June this year from December closing last year, despite close monitoring by the central bank.
The amount rose to Tk 741.48 billion as on June 30, 2017 from Tk 621.72 billion as on December 31, 2016. The amount of NPLs was Tk 633.65 billion a year before.
Bankers attributed the substantial rise in NPLs to lax loan recovery drive in the January-March period of this calendar year (Q1) and less rescheduling in the six months period to June this year.
Senior bankers, however, expressed their fear that the situation might deteriorate further in the July-September quarter as recovery of loans, particularly of small and medium enterprises (SMEs), might face a setback due to the flood in different parts of the country.
They apprehended that some borrowers would default repayments against both the rescheduled and restructured large loans during the remaining quarters of the year.
Talking to the FE, a senior official of Bangladesh Bank (BB) said the amount of NPLs normally rises during the Q1 and Q3 of each calendar year.
"We expect that the amount of NPLs may fall in the final quarter," he said, explaining the recent trend of classified loans.
The share of classified loans reached at 10.13 per cent of the total outstanding loans during the period under review than that of 9.23 per cent six months before, according to the central bank's latest statistics.
"We're working continuously to contain the volume of NPLs," SK Sur Chowdhury, deputy governor of the BB, told the FE.
As part of the move, he said, the BB has already instructed the banks to take effective measures for preventing further rise in classified loans. "It should also be taken care of that no fresh loan turns classified."
The BB has also advised the banks to hire senior lawyers for vacating the loan-related writ petitions with the High Court.
However, the volume of NPLs was Tk 734.09 billion in the first quarter (Q1) of this calendar year while it was 10.53 per cent of the total outstanding credit, the BB data showed.
A portion of large restructured loans will become impaired in the coming months, said Syed Mahbubur Rahman, managing director and chief executive officer (CEO) of Dhaka Bank Limited.
The central bank had earlier cleared the proposals of 10 business groups in restructuring their large loans worth Tk 140.48 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 advised the bankers to strengthen monitoring and supervision on loans, particularly SMEs, to avoid unwanted situation in future.
Nurul Amin, chief executive officer (CEO) and managing director (MD) of Meghna Bank Limited, also advised that the bankers to take vigorous efforts in recovering their NPLs and bringing down the rate to single digit from the existing level.
Some rescheduled loans along with fresh ones might enter non-performing territory in the coming quarters, he warned.
During the first half of the calendar year, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to Tk 345.81 billion from Tk 310.26 billion on December 31 last. It was Tk 357.16 billion in Q1 of this calendar year.
On the other hand, the total amount of NPLs with 40 private commercial banks (PCBs) reached to Tk 317.29 billion as on June 30 last from Tk 230.57 billion in the final quarter of last year. It was Tk 297.27 billion as on March 31 last.
The NPLs from nine foreign commercial banks (FCBs) came down to Tk 23.21 billion during the period under review from Tk 24.05 billion in the Q4 of 2016. It was Tk 22.82 billion of the Q1 of 2017.
The classified loans with two development-finance institutions (DFIs) also came down to Tk 55.18 billion in the H1 of 2017 from Tk 56.84 billion six months before. It was Tk 56.84 in the Q1 of this calendar year.
The NPLs cover substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 7,316.26 billion as on June 30 last from Tk 6,739.20 billion as on December 31. It was Tk 6,970 billion as on March 31, 2017.