Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN)– The central bank of Bangladesh is trying to find a way out to ease pressure of defaulted loans that have already reached an alarming level in the country’s banking system, officials said.

As part of the moves, the Bangladesh Bank (BB), the country’s central bank, has already formed three committees to prepare a set of recommendations for amending three relevant pieces of law and regulations to help reduce the volume of classified loans.

The committees are now working to submit the recommendations to finance ministry for amending the Banking Companies Act, Bankruptcy Act and Negotiable Instrument Act along with Merger and Acquisition (M&A) regulation.

Talking to the BBN, a senior member of the committees said they have already started work to prepare recommendations in line with the requirements of the authorities concerned.

He also said the committees are trying to submit their recommendations to the authorities as early as possible.
Besides, the central bank has called a special meeting aiming to recover non-performing loans (NPLs) particularly from habitual ones though reforming the existing acts and regulations.

The meeting is scheduled to be held at the central bank headquarters today (Wednesday) with BB Governor Fazle Kabir in the chair, they added.

All managing directors (MDs) and chief executive officials of banks are invited to attend the meeting requesting to express their problems particularly legal ones for recovering their default loans.

Law Commission Chairman ABM Khairul Haque and Bangladesh International Arbitration Centre CEO Muhammad A (Rumee) Ali are expected to present at the meeting to help exploring legal measures with a view to prevent habitual defaulters, they added.

The central bank’s latest moves came against the backdrop of rising trend in default loans in the country’s banking system in the recent months.

The share of default loans reached at 11.45 per cent at the end of September, 2018 after registering at 10 per cent during the period between 2013 and 2017, which is alarming, the BB said in a document.

The volume of NPLs jumped by nearly 34 per cent or BDT 250.67 billion to BDT 993.70 billion as on September 30, 2018, from BDT 743.03 billion as on December 31, 2017, according to BB data.

The share of classified loans also rose to 11.45 per cent of the total outstanding loans in September 2018 from 9.31 per cent in December 2017.

The default loans include substandard, doubtful and bad/loss of total outstanding credits, which stood at BDT 8,680.07 billion as on September 30, 2018, from BDT 7,981.96 billion as on December 31, 2017.