Dhaka, Bangladesh (BBN)- The volume of classified loans in the country’s banking system increased further in the second quarter (Q2) of 2014 due to surge in default credits by the scam-hit BASIC Bank, officials said.
The amount of non-performing loans (NPL) increased 6.58 percent to BDT 513.44 billion in the April-June period of 2014 from BDT 481.72 billion in the previous quarter of this calendar year. It was BDT 405.83 billion in the last quarter of 2013.
During the second quarter, the share of classified loans in the total outstanding loans of the banking system rose to 10.75 percent from 10.45 percent in the previous quarter.
During the April-June period, the total amount of the NPL with the four state-owned commercial banks (SoCBs) rose to BDT 197.19 billion from BDT 186.89 billion.
On the other hand, the total amount of classified loans with 39 private commercial banks (PCBs) amounted to BDT 191.50 billion in Q2 against BDT 185.29 billion in the Q1.
The classified loans of nine foreign commercial banks (FCBs) also rose to BDT 14.22 billion from BDT 12.27 billion.
The default loans with four development-finance institutions (DFIs) surged to BDT 110.51 billion in Q2 from BDT 97.27 billion in Q1.
Of them, the classified loan with the state-owned BASIC Bank jumped by nearly 80 per cent to BDT 45.90 billion in Q2 from BDT 25.57 billion in Q1.
In the Q1, the amount of classified loans increased significantly due mainly to the lack of proper monitoring and supervision of rescheduled loans.
On December 23 last year, the Bangladesh Bank (BB) relaxed the loan rescheduling policy for the next six months to facilitate financing for the businesses, affected by political unrest.
The amount of default loan dropped significantly in the last quarter of 2013 as a substantial amount of loan was rescheduled by the banks taking advantage of loan rescheduling policy relaxation.
As of December 31 last year, the banking sector’s total classified loans came down to BDT 405.83 billion from BDT 567.20 billion on September 30 last year, following relaxation of the loan rescheduling policy.
“A portion of rescheduled loan has already turned into classified ones because of weak monitoring and supervision of the commercial banks,” a senior banker told BBN in Dhaka.
He also said the volume of default loans may rise further in the Q3 if the BB will not take any effective measures.

BBN/SSR/AD-12Aug14-11:13 am (BST)