Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has asked the commercial banks to reduce their volume of classified loans through strengthening monitoring of such loan accounts amounting to BDT 1.0 billion and above.

Under the latest measure, all the banks will have to form special monitoring cell, headed by the deputy managing director (DMD) concerned, to monitor the loan accounts amounting to BDT1.0 billion and above, according to a notification, issued by the Bangladesh Bank (BB) on Monday.

Talking to the BBN, a senior BB official said the central bank has taken the fresh measure to reduce both the amount of default loans and the number of loan defaulters through boosting recovery of such loans.

The special monitoring cell will have to submit ‘quarterly statement of classified loans amounting BDT 1.0 billion and above’ to the board concerned, mentioning progress of recovering such loans.

The central bank also included a prescribed format of the quarterly statement with the notification.

The management of each bank will formulate a time-bound action plan for recovering such default loans, according to the notification.

The board of directors will give necessary directives after revaluating implementation of the plan. The board will also ensure review of the quarterly statement, it added.

The statement from October-December period of 2019 to April-June of 2020 will be submitted to the central bank in soft and hard copies.

Later, the statement will be submitted to the central bank using the BB’s web portal and EDW (enterprise data warehouse) software from April-June period of 2020.

The BB’s latest initiative came against the backdrop of the rising volume of default loans in the country’s banking system in the recent months.

The volume of non-performing loans (NPLs) soared by more than 18 per cent to BDT 1,108.73 billion in the first quarter (January-March) of the current calendar year from BDT 939.11 billion in the previous quarter, the BB data showed.

Senior bankers, however, said both the management and the board of a banks will be responsible for recovering such loans through due implementation of the notification.

“The BB’s latest initiative may help reduce the volume of NPLs in near future,” Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), said while explaining the possible impact on the notification.
Most of the banks have already formed such cell to recover their stressed assets, he added.