Dhaka, Bangladesh (BBN) - The classified loans of the offshore banking units (OBUs) of different banks swelled more than four times in the first quarter (Q1) of the current calendar year.
The non-performing loans (NPLs) that were offered in terms of foreign currency rose to BDT 4.10 billion during the January-March period from BDT 1.01 billion in the preceding quarter, according to the central bank’s latest statistics.
In Q1 of this year, the figure of the classified loans was earlier stated at Tk 11.90 billion as a leading private commercial bank (PCB) wrongly reported NPL to be of Tk 7.81 billion in their OBU operations, according to a senior official of the Bangladesh Bank (BB).
Later on, the PCB had sought apology from the Bangladesh Bank (BB)’s department concerned and requested to drop the figure from the BB’s report, he added.
“There is no scope to drop the figure right now because the report has already been sent to different departments of the central bank as well as the government,” the central banker explained.
He also said it will be corrected in the next quarter report on classified loan and provisioning of the OBUs.
Talking to BBN anther BB official said the OBU’s classified loans jumped during the period under review because a substantial amount foreign currency loan of a first generation PCB entered troubled credit territory.
The share of classified loans on total outstanding also rose to 0.98 per cent during the period under review from 0.26 per cent three months ago.
The NPLs cover substandard, doubtful and bad/loss of total outstanding credits which reached BDT 419.72 billion as of March 31 from BDT 393.30 billion in the final quarter of last calendar year. It was BDT 311.77 billion as of September 30, 2016.
The OBUs are allowed to provide foreign currency loans to their customers.
It also allowed carrying on transactions in specified foreign currencies. The suggested currencies are US dollar, British pound, Canadian dollar, Deutsche mark, Japanese yen, Swiss franc, the Netherlands guilder, French franc, Swedish kroner and Singaporean dollar.
Currently, 35 commercial banks out of 57 are running their OBUs across the country as per a directive issued by the Banking Control Department of BB on December 17, 1985.
Under the directive, the OBUs have been allowed exemption from the purview of certain provisions of the Banking Companies Ordinance 1962 as per the government notification.
Besides, the OBUs will also be considered for exemption from Article 36(1) of the Bangladesh Bank Order 1972 on such terms and for such period as may be deemed fit by the government.
It means the OBUs are exempt from maintaining CRR (cash reserve requirement), SLR (statutory liquidity ratio) with the central bank of Bangladesh against their liabilities.
The OBUs are free to accept deposits from outside Bangladesh and borrow from abroad. They are also free to make advances/investments abroad and also make permissible transactions with industries in the export processing zones (EPZs).
“There will not be any restriction on the physical location of the OBUs. These may be located both in the EPZs or any other convenient location outside-even existing branches of banks may be allowed to operate such units through a completely separate counter,” the governing bank had said in the directive.
BBN/SSR/AD