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Dhaka, Bangladesh (BBN) – Overall shortfall in provision against both classified and unclassified loans in the country’s banking system jumped by nearly 24 per cent in the last calendar year, officials said

Some banks ran short on the provisions following higher classified loans along with conditional rescheduling of credits, they added.

The amount of provisioning shortfalls rose to BDT 67.67 billion as on December 31 last year from BDT 54.70 billion on the same day of the previous year, according to the central bank’s latest statistics.

It was BDT 42.83 billion as on December 31, 2015.

According to the central bank confidential report, nine banks out of 57 have failed to keep requisite provisions against loans, particularly classified ones during the period under review.

Of them, three are state-owned commercial banks (SoCBs), five private commercial banks (PCBs) and the rest development-finance institution (DFI).

In 2016, only six have failed to keep requisite provisions against loans. Of them, three were SoCBs and the rest PCBs.

The Bangladesh Bank (BB), the country’s central bank, is likely to seek time-bound action plans from the banks concerned on case to case basis to reduce their provisioning shortfalls, the officials hinted.

“Some banks have maintained more provisions against their conditional rescheduling of loans,” a BB senior official told the BBN in Dhaka.

He also said a large amount of non-performing loans (NPLs) had been rescheduled with some conditions set by the central bank to minimise risks.

Such rescheduled credits were treated as unclassified ones, but the banks were asked to maintain provisions in accordance with previous status of the loans, according to the central banker.

Besides, a portion of rescheduled loans have already turned into classified ones again that also pushed up the volume of provisioning shortfall, according to M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited.

He also said the banks will have to take effective measures to reduce the volume of default loans through boosting their recovery drives to improve their financial heaths.

The volume of NPLs in the county’s banking system rose by 19.51 per cent to BDT 743.03 billion as on December 31 last year from BDT 621.72 billion a year ago, the BB data showed.

Under the existing BB regulations, the banks have to keep 0.25 per cent to 5.0 per cent provisions against general-category loans, 20 per cent provision against substandard category, 50 per cent against doubtful loans and 100 per cent against bad or loss category.

The banks normally keep required provisions against their unclassified and NPLs from their operating profits in a bid to mitigate financial risks.

Talking to the BBN, another BB official said the banks may decrease their provisioning shortfall through reducing classified loans or enhancing eligible collaterals against the credits.

The banks will have to maintain provisioning against all types of loans to protect the interests of their (banks) depositors, the central banker noted.