Dhaka, Bangladesh (BBN) - The amount classified loans in the country’s banking sector might even grow bigger in the coming quarters, according to some senior bankers.
They said that some borrowers would default on repayments against both rescheduled and restructured large loans during the remaining quarters of the current calendar year.
“The volume of non-performing loans (NPLs) in the banking system may rise further in the coming quarters because some borrowers may fail to make their repayment of instalments against restructured large loans along with rescheduled ones,” Nazrul Huda, former senior deputy governor of the Bangladesh Bank (BB) observed.
The senior central banker’s observations came in the wake of the NPL amounts having risen by more than 23 per cent or BDT 120 billion in the first half (H1) of 2016.
The volume of NPLs rose to BDT 633.65 billion as on June 30 last from BDT 513.71 billion as on December 2015. It was BDT 525.19 billion a year before.
The share of classified loans also rose to 10.06 per cent of the total outstanding loans during the period under review from 8.79 per cent six months before.
The classified loans cover substandard, doubtful and bad/loss of total outstanding credits which stood at BDT 6300.19 billion as on June 30 last from BDT 5846.15 billion as on December 31. It was BDT 5986.48 billion as on March 31, 2016.
Nurul Amin, Chief Executive Officer and (CEO) and Managing Director (MD) of Meghna Bank Limited said a portion of rescheduled loans along with fresh ones might enter non-performing territory during the period under review. “It’s a quite alarming situation in the banking system for the rest of this calendar year.”
During the period, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to BDT 300.77 billion from BDT 237. 45 billion as on December 31 last. It was BDT 272.89 billion in the Q1 of this calendar year.
On the other hand, the total amount of classified loans with 39 private commercial banks (PCBs) reached BDT 253.15 billion in the Q2 from BDT 207.60 billion in the final quarter of last year. It was BDT 253.31 billion as on March 31last.
The classified loans from nine foreign commercial banks (FCBs) rose to BDT 21.56 billion during the period under review from BDT 19.42 billion in the Q4 of 2015. It was BDT 18.22 billion of the Q1 of this calendar year.
The NPLs with two development-finance institutions (DFIs) rose to BDT 58.17 billion in the H1 of 2016 from BDT 49.69 billion six months before. It was BDT 49.69 in the Q1 of this calendar year.
“The amount of NPLs increased significantly during the period under review mainly for a lack of due diligence on part of the bankers along with good governance particularly in the public banks,” a senior BB official told BBN in Dhaka.
He also said the banks will have to take vigorous efforts for recovering their NPLs immediately for improving such situation.
BBN/SSR/AD