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The amount of troubled loans in the banking system dived in the fourth quarter of 2019, aided by the special facilities central bank offered to defaulters.
The non-performing loans, or NPLs, shrank by nearly 19 per cent to Tk 943.31 billion as of December 31 of the year from Tk 1,162.88 billion three months before, according to the central bank's latest statistics released on Monday.
The amount of NPLs edged up by 0.45 per cent to Tk 943.31 billion in 2019 from Tk 939.11 billion a year earlier, despite the policy support from the Bangladesh Bank to delinquent borrowers.
The uptrend in NPLs fell in the fourth quarter (Q4), helped by loan rescheduling and the exit provision, officials said.
The central bank 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.
Also, such borrowers were allowed to avail one-time exit facility clearing dues within 360 days after approving such facility by the banks. The facility has already expired.
"Our policy support has played a role in slashing the volume of classified loans in the banking sector during the period," central bank's spokesperson Serajul Islam told the FE.
Mr. Islam, an executive director of the central bank, said the amount of NPLs dropped in the final quarter of 2019 as banks stepped up recovery drive.
The banks normally strengthen recovery drives in the final quarter of each calendar year as part of their balance sheets management," he added.
The share of NPLs in the total outstanding loans came down to 9.32 per cent as of December 31 in 2019 from 11.99 per cent three months back. It was 10.30 per cent on December 31, 2018.
The classified loans cover substandard, doubtful and bad/loss portions of total outstanding credit, which stood at Tk 10,118.29 billion on December 31 last from Tk 9,698.82 billion in the Q3 of 2019. The amount was Tk 9,114.30 billion a year ago.
Senior bankers are not that excited about the falloff.
The amount of classified loans might slightly go up in the first quarter of this year as the central bank is conducting inspections.
"The situation may get reversed in the Q1 of 2021 if borrowers fail to repay the instalments against rescheduled loans after enjoying a one-year moratorium," a senior executive of a leading private commercial bank (PCB) told the FE preferring anonymity.
M A Halim Chowdhury, managing director and chief executive officer of Pubali Bank Limited, told the FE higher rescheduling of loans has helped reduce the volume of NPLs in the banking sector in 2019.
Defaulters regularised more than Tk 501 billion in loans through rescheduling in 2019, the data shows.
Of the amount, nearly Tk 186 billion was regularised taking the advantage of the relaxed policy.
The senior banker said cash recovery also rose helped by down payment.
The total amount of defaulted loans with the six state-owned banks came down to Tk 439.94 billion in the Q4 from Tk 549.22 billion three months before.
Private banks also fared well.
The total volume of NPLs with 41 private banks fell to Tk 442.74 billion as of December 31 last, from Tk 545.74 billion in the Q3 of 2019.
The classified loans of nine foreign banks contracted to Tk 21.09 billion from Tk 20.91 billion three months ago.
The classified loans with the two development-finance institutions dropped to Tk 40.59 billion as of December 31 last from Tk 40.08 billion three months earlier.