Dhaka, Bangladesh (BBN) – The amount of classified loans in the country’s banking system marked a gradual rise throughout this calendar year and reached BDT 567.20 billion in the third quarter (Q3), officials said.

The rise in default loans mainly to sluggish business activities amid the ongoing political turmoil, senior bankers said.

The volume of classified loans marked a rise of more than 8.0 percent or BDT 44.10 billion in the July-September period of 2013 over that of the previous quarter.

It was BDT 523.09 billion in the second quarter (April-June), and BDT 510.20 billion in the first quarter (Jan-March), according to the central bank statistics.

During the third quarter, the share of non-performing loans (NPL) in the total outstanding loans of the banking system increased by 0.88 percentage point.

The share of the classified loans rose to 12.79 percent in the period under review, from 11.91 percent in the previous quarter.

“The amount of default loans has increased in the third quarter of this calendar year because of political uncertainty centring the next general election,” a senior executive of a leading private commercial bank told BBN in Dhaka.

He also said a good number of borrowers cannot repay loans timely mainly due to the slowdown in their business activities amid the ongoing political instability.

 “We expect that the volume of default loans will decrease by the end of this calendar year, if the country’s overall business activities remain unhurt,” the private banker noted.

During the period (July-Sept 2013), the total amount of default loans with the four state-owned commercial banks (SoCBs) rose to BDT 241.74 billion from BDT 238.53 billion.

On the other hand, the total amount of classified loans with 37 private commercial banks (PCBs) reached BDT 223.08 billion from BDT 196.11 billion.

The classified loans of nine foreign commercial banks (FCBs) stood at BDT 14.54 billion in September 2013 against BDT 10.89 billion in June this year.

The default loans with five development finance institutions (DFIs) rose to BDT 87.84 billion in the third quarter from BDT 77.56 billion.

BBN/SSR/AD-08Nov13-5:05 pm (BST)