The amount of classified loans in the banking sector surpassed Tk 1.0 trillion-mark for the first time in March 2019, apparently defying close monitoring of the central bank.
The volume of non-performing loans (NPLs) jumped by more than 18 per cent to Tk 1,108.73 billion in the first quarter (Q1) of the year from Tk 939.11 billion in the preceding quarter, according the latest statistics of Bangladesh Bank (BB).
The share of NPLs also rose to 11.87 per cent of the total outstanding loans in the Q1 of 2019 from 10.30 per cent in the previous quarter.
Similarly, the amount of classified loans soared by more than 25 per cent or Tk 222.84 billion in the Q1 of 2019 compared to that of the same period in the previous calendar year.
The amount of NPLs was Tk 885.89 billion as on March 31, 2018.
Talking to the FE, BB spokesperson Md. Serajul Islam said the amount of classified loans normally rises during the first quarter of each calendar year and will decline in the foreseeable future.
"We expect the amount of NPLs to come down in the second quarter (Q2) of this calendar year," said Mr. Islam, an executive director of the central bank.
The classified loans cover substandard, doubtful and bad/lost part of total outstanding credits, which stood at Tk 9,337.27 billion as on March 31. It was Tk 9,114.30 billion three months before.
"There is no alternative to boosting recovery drives to reduce the amount of the classified loans," the BB spokesperson said.
He also advised the bankers to provide fresh loans to eligible borrowers through stern and due diligence.
Senior bankers, however, said the amount of NPLs increased significantly during the period due to low rescheduling and lower recovery.
Besides, a portion of rescheduled loans has turned into default once again mainly due to the lack of enforcing repayment schedule properly, they argued.
They said some borrowers, particularly large ones, have maintained a 'go slow' policy to clear their installments for taking the advantage of policy relaxation.
The echoed Mr Islma, saying the amount of NPLs is expected to fall significantly in the Q2 when the revised policy on loan classifications is implemented.
On April 22, the central bank had revised loan classification rules to treat unpaid installment(s) of a term loan as 'overdue' after six months of its (loan) 'expiry' date.
The revised loan classification rules will come into effect from June 30.
The central bank also offered a special facility to loan defaulters on May 16, allowing them to reschedule loans by paying 2.0 per cent down payment for a maximum of 10 years.
However, the High Court stayed the BB's special offers until June 23.
M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, said the volume of NPLs may start falling from Q2, which will continue.
"The bankers are now carefully sanctioning loans to avoid new classification in future," the senior banker told the FE.
During the January-March period of 2019, the total amount of NPLs with the six state-owned commercial banks rose to Tk 538.79 billion from Tk 486.96 billion in the previous quarter.
In contrast, the total classified loans with 40 private commercial banks (PCBs) soared to Tk 499.50 billion in the Q1 of 2019 from Tk 381.40 billion three months before.
The NPLs of the nine foreign commercial banks (FCBs), however, came down to Tk 22.56 billion during the Q1 of this year from Tk 22.88 billion of the previous quarter.
The classified loans with the two development-finance institutions (DFIs) remained unchanged at Tk 47.88 billion in the Q1, the BB data showed.
Analysts remain worried over the situation.
Khondkar Ibrahim Khaled, former deputy governor of the BB, told the FE over phone that the amount of defaulted loans increased significantly in the Q1 as some banks concealed the NPL figures in December, which were included in the classified loan statement in March.
"Although the NPL figures might be shown lower in the next quarter but it would not decrease in the real sense," the senior banker noted.
Nurul Amin, former chairman of the Association of Bankers, Bangladesh (ABB), also expressed his fear that such a rise in NPLs might reduce the banks' ability to lend.
"It will also affect the profitability of the banks if the upward trend in defaulted loans continues," he said.
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