Dhaka, Bangladesh (BBN)– The amount of non-performing loans (NPLs) jumped by 20.24 per cent as on June 30 in Bangladesh’s banking sector from December last year despite close monitoring by the central bank.

The volume of NPLs rose to BDT 893.40 billion as of June 30, 2018 from BDT 743.03 billion as of December 31 last. The amount of NPLs was BDT 741.48 billion a year ago.

The share of classified loans reached 10.41 per cent of the total outstanding loans during the period under review than that of 9.31 per cent six months back, according to the central bank’s latest statistics.

Lax loan recovery drive in the first quarter (Q1) period of 2018 along with turning of some rescheduled credits into classified loan again during the first six months to June have pushed up the overall volume of default loans, senior bankers told the BBN.
They also said some fresh loans also became classified during the period under review.
The bankers, however, expect that the amount of NPLs might fall in the final quarter of this calendar year mainly due to the upcoming national election.

Some banks have already instructed their divisional and branch offices across the country for taking preparations to recover default loans from possible candidates, according to the bankers.

Talking to the BBN, a senior official of the Bangladesh Bank (BB) said the amount of NPLs increased slightly in the second quarter (Q2), but the share of classified loans of the total outstanding credits dropped as of June 30.

The volume of NPLs was BDT 885.89 billion in the Q1 of this calendar year while it was 10.78 per cent of the total outstanding credits, the BB data showed.

The NPLs cover substandard, doubtful and bad/loss of total outstanding credits, which stood at BDT 8,585.21 billion as of June 30 last from BDT 7,981.96 billion as of December 31. It was BDT 8,221.37 billion as of March 31, 2018.

During the first half of the current calendar year, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to BDT 428.52 billion from BDT 373.26 billion on December 31 last. It was BDT 436.85 billion in the Q1 of 2018.

On the other hand, the total amount of NPLs with 40 private commercial banks (PCBs) reached BDT 389.75 billion as of June 30 last from BDT 293.96 billion in the final quarter of last year. It was BDT 372.89 billion as of March 31 last.

The NPLs from nine foreign commercial banks (FCBs) rose to BDT 22.71 billion during the period under review from BDT 21.54 billion in the Q4 of 2017. It was BDT 21.88 billion in the Q1 of 2018.

The classified loans with two development-finance institutions (DFIs) also came down to BDT 52.41 billion as of June 30 last from BDT 54.26 billion six months ago. It was BDT 54.26 in the Q1 of this calendar year.

“A portion of restructured large loans has already turned into NPLs that also pushed up the overall volume of classified loans in the banking system,” Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), said while explaining the upward trend in default loans.

The central bank of Bangladesh had cleared proposals of 11 business groups for restructuring their large loans worth around BDT 153.26 billion.

A total of 22 commercial banks had earlier forwarded the proposals to the BB for approving the loan restructuring on behalf of their clients.

Mr. Rahman, also managing director (MD) and chief executive officer (CEO) of Dhaka Bank Ltd, said the existing upward trend in NPLs may continue in the Q3 of 2018. “But the volume of default loans may fall slightly by the end of 2018.”

“Our officials have already started communications with possible candidates of the upcoming election to recover their default loans,” M A Halim Chowdhury, MD and CEO of Pubali Bank Limited said while replying to a query.

He also said one or two classified loans have already been recovered from possible candidates.

Bangladesh’s senior bankers classified loans in the banking sector identified as a number one challenge, saying that the banks can not reduce the volume of NPLs without help of authorities concerned.

“We need social and political commitments to face the NPLs challenge in the banking sector of Bangladesh,” Mosleh Uddin Ahmed, MD and CEO of NCC Bank Limited told the BBN earlier.

BBN/SSR/AD