Central Bank to ask NBFIs strengthening recovery of default loans

Last updated: October 22, 2008

Dhaka, Bangladesh (BBN)- The central bank of Bangladesh will give a fresh directive to the non-banking financial institutions (NBFIs) to intensify drive to recover non-performing loans (NPL) for improving their financial health.

The directive will be made from a review meeting with the chief executive officers and managing directors of the NBFIs to be held at the central bank on Wednesday)with Bangladesh Bank (BB) Governor Salehuddin Ahmed in the chair, officials said.

The BB's move will come against the backdrop of the rising trend of classified loan portfolios of the NBFIs in the first half of the current calendar year.

The rate of overall default loans in the non-banking financial sector climbed to 8.0 per cent in June this year from 6.0 per cent registered three months earlier, they added.

The non-performing loans (NPLs) have increased by 2.0 percentage points mainly due to poor recovery by some non-banking financial institutions (NBFIs) during the period.

The central bank earlier instructed at least seven NBFIs out of 29 to take necessary steps to reduce the amounts of classified loans immediately.

"We will ask the NBFIs to strengthen their recovery drive of default loans to improve their financial health," a BB senior official told BBN, adding that the meeting would discuss different issues including the rising trend in cost of funds and the deposit situation of the non-banking sector.

During the meeting, the market operators are likely to request the central bank to help ease conditions attached to the collection of fresh funds from individuals and institutions.

Most of NBFIs are now facing difficulties in running their business smoothly mainly due to liquidity shortfall, according to the market operators

BBN/SI/SS/AD-22October08-9:30 AM (BST) .

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