Dhaka, Bangladesh (BBN) – The amount of default loans is increasing continuously in the recent months despite close monitoring by the central bank of Bangladesh.

The volume of classified loans in the country’s banking sector rose further by BDT 7.39 billion in the second quarter (Q2) of this calendar year taking the total defaulted loans to BDT 119.76 billion in the first six months of 2017.

The non-performing loans (NPLs) rose to BDT 741.48 billion as on June 30, 2017 from BDT 621.72 billion as on December 31, 2016. The amount of NPLs was BDT 633.65 billion a year before.

Bankers and senior officials of the central bank have attributed the substantial rise in NPLs to lax loan recovery drive in the January-March period of this calendar year (Q1) and less rescheduling in the six months period to June this year.

Senior bankers, however, expressed their fear that the situation might deteriorate further in the July-September quarter as recovery of loans, particularly of small and medium enterprises (SMEs), might face a setback due to the flood in different parts of Bangladesh.

They also apprehended that some borrowers would default repayments against both the rescheduled and restructured large loans during the remaining quarters of the year.

The share of classified loans reached at 10.13 per cent of the total outstanding loans during the period under review than that of 9.23 per cent six months before, according to the central bank’s latest statistics.

The amount of NPLs normally rises during the Q1 and Q3 of each calendar year, they said, adding that volume of default loans might fall in the final quarter of this year.

During the period under review, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to BDT 345.81 billion from BDT 310.26 billion on December 31 last. It was BDT 357.16 billion in Q1 of this calendar year.

On the other hand, the total amount of NPLs with 40 private commercial banks (PCBs) reached to BDT 317.29 billion as on June 30 last from BDT 230.57 billion in the final quarter of last year. It was BDT 297.27 billion as on March 31 last.

The NPLs from nine foreign commercial banks (FCBs) came down to BDT 23.21 billion during the period under review from BDT 24.05 billion in the Q4 of 2016. It was BDT 22.82 billion of the Q1 of 2017.

The classified loans with two specialized banks also came down to BDT 55.18 billion in the first-half of this year from BDT 56.84 billion six months before. It was BDT 56.84 in the Q1 of this calendar year.

The default loans cover substandard, doubtful and bad/loss of total outstanding credits, which stood at BDT 7,316.26 billion as on June 30 last from BDT 6,739.20 billion as on December 31. It was BDT 6,970 billion as on March 31, 2017.

Talking to BBN in Dhaka, SK Sur Chowdhury, deputy governor of the Bangladesh Bank (BB), said the central bank is working working continuously to contain the volume of default loans.

As part of the move, the central bank has already instructed the banks to take effective measures for preventing further rise in classified loans, he added. “It should also be taken care of that no fresh loan turns classified.”

The central bank of Bangladesh has also advised the banks to hire senior lawyers for vacating the loan-related writ petitions with the High Court, the deputy governor noted.