Dhaka, Bangladesh (BBN)– Bangladesh’s banking sector performance witnessed some concerns including higher classified loans in the final quarter of the fiscal year (FY) 2015-16 compared to that of the previous quarter, according to the central bank’s latest quarterly report.
“Several key indicators such as gross nonperforming loans (NPL), provision shortfall position, return on assets (ROA) and return on equity (ROE) exhibit deteriorations during the quarter compared to the previous one,” said the latest Bangladesh Bank Quarterly (BBQ) for April-June, 2016.
The ratio of gross NPL to the total outstanding loans of the banking sector increased to 10.06 per cent at the end of fourth quarter (Q4) of the FY 16 from 9.92 per cent at the end of the Q3 of the same fiscal.
However, the ratio of net NPL decreased to 2.81 per cent at the end of June last from 2.88 per cent at the end of March 2016.
The provision shortfall position of the banking sector deteriorated during the April-June period of the FY 16 and stood at BDT 44.5 billion from BDT 41.2 billion three months ago.
Besides, the overall capital-to-risk weighted assets ratio (CRAR) of all banks came down to 10.34 per cent in the Q4 of the last fiscal from 10.62 per cent of the preceding quarter under Basel-III calculations.
Among the profitability measures, ROA of the banking industry declined to 0.44 per cent at the end of June 2016 from 0.77 per cent at the end of December 2015 while ROE also decreased to 6.74 per cent from 10.51 per cent.
Besides, the monthly interest rate spread for all banks, measured as the difference between the monthly weighted average interest rate of advances and deposits, remained below 5.0 per cent during the Q4.
Talking to BBN, a senior official of the BB said the central bank has expedited monitoring and supervision aiming to improve performance of the country’s banking sector.
He also said the four state-owned commercial banks (SCBs) have been asked for taking vigorous efforts immediately to reduce their volume of classified loans.
Moreover, the BBQ said real GDP (gross domestic product) grew by 7.05 per cent in the FY compared to 6.55 per cent in the last FY, mainly supported by a stable political environment along with pragmatic fiscal and accommodative monetary policies.
Monetary Policy Statement for first half (H1) and Second half (H2) of the FY ’15-‘16 was inclusively growth-supportive, according to the BBQ.
“To keep up growth momentum and maintain tolerable level of inflation, monetary policy for H1FY17 is announced which is supportive for achieving 7.2 per cent real GDP growth and an inflation rate at or below 5.8 per cent for FY 17,” it noted.
However, overall inflation is expected to be softening with agricultural growth stemming from the persistent agricultural production, smooth flow of supply chain in domestic market due to absence of political uncertainty, the central bank observed.