Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has decided to form a high-powered committee to recommend measures for reducing the volume of classified loans in the banking system.

The decision was taken at an emergency meeting, held at the Bangladesh Bank (BB) headquarters in Dhaka on Tuesday with BB Governor Fazle Kabir in the chair, officials said.

Md. Ashadul Islam, Senior Secretary of the Financial Institutions Division, Ministry of Finance, and Md. Fazlul Haque, Additional Secretary, were present at the meeting.

The committee will be formed with senior officials of four departments of the central bank, which are responsible for monitoring and supervision of non-performing loans (NPLs).

The departments are Banking Regulation and Policy Department (BRPD), Department of Off-Site Supervision (DOS), Department of Banking Inspection (DBI), and Financial Stability Department (FID).

Talking to the BBN BB Spokesperson Md. Serajul Islam said the committee will prepare its recommendations in consultation with major stakeholders, including both public and private commercial banks.

“We expect that the committee will submit its recommendations to the BB governor as early as possible,” he noted.
The BB’s latest move came just a day after releasing figures of NPLs in the first quarter (Q1) of the current calendar year.

The figures show that the amount of classified loans in the banking sector surpassed the BDT 1.0 trillion-mark in March 2019 for the first time.

The volume of NPLs jumped by more than 18 per cent to BDT 1,108.73 billion in Q1 of the year, from BDT 939.11 billion in the preceding quarter, despite close monitoring of the central bank.

The meeting reviewed the latest situation of default loans in the country’s banking sector, asking the banks for taking effective measures to reduce their NPLs immediately.

The meeting found that a significant amount of NPLs has been included in the classified loan statements of Q1 of this year due to vacancy of the previous writ petition, pending with the courts, according to sources.

Besides, difference in audited and unaudited figures of default loans in December 2018 also created an impact on the situation of overall classified loans as on March 31, 2019.

But the meeting also thought that these two are not the only causes for the rising trend in the default loans, they explained.

Managing directors (MDs) and chief executive officers (CEOs) of four state-owned commercial banks (SoCBs) – Sonali, Janata, Agrani and Rupali – attended the meeting.

Besides, the MDs and CEOs of three private commercial banks (PCBs) that have higher amount of classified loans took part at the meeting, the sources added.