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NPLs dip by Tk9,764cr at the end of Dec

Reschedules and write-offs key reasons
ASM Saad
12 Feb 2024 21:25:19 | Update: 12 Feb 2024 21:25:19
NPLs dip by Tk9,764cr at the end of Dec

Non-performing loans (NPL) in Bangladesh declined to Tk 1,45,633 crore at the end of December last year, occupying 9 per cent of the banking sector’s outstanding loans of Tk 16,17,689 crore.

NPLs decreased by Tk 9,764 crore at the end of December, compared to Tk 1,55,397 crore recorded at the end of September last year – which was occupying 9.93 per cent of the banking sector’s outstanding loans of Tk 15,65,195 crore.

Speaking to The Business Post, former chairman of Association of Bankers, Bangladesh (ABB) Mohammed Nurul Amin said, “There are three key reasons behind the dip in NPLs at the end of December, compared to September last year.

“Usually, the banks decrease the volume of NPLs through recovery, rescheduling or write-offs of loans. So the central bank should be clear about how the NPLs decreased in the banking sector.”

He added, “The central bank gave rescheduling privileges to banks for reducing classified loans. As a result, there are many people who are taking this privilege, and the amount of NPLs is decreasing in the banking sector.”

Meanwhile, Policy Research Institute of Bangladesh (PRI) Executive Director Ahsan H Mansur said, “The central bank gave special loan rescheduling preferences to two big groups.”

“As a result, NPLs decreased in the December quarter, down from June this year. So this is not good information for the banking sector. The regulator is trying to show a downward trend, but ultimately, the banking sector is vulnerable right now.”

Center for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman said, “The banking sector is not well. The central bank gave some groups the chance to reschedule, which is ultimately not beneficial for the country’s economy. The banks will have to collect the NPLs.

“The regulator took many initiatives that are not visible. The regulator should be firm about defaulters.”

At the end December last year, NPLs stood at Tk 65,781 crore in commercial banks, which is 20.99 per cent of the total classified loans in the country. Meanwhile, private commercial banks' NPLs stood at Tk 70,982 crore, which is 5.93 per cent of the banking sector.

Foreign commercial banks recorded Tk 3,200 crore in NPLs during the October-December period, which is 4.82 per cent of the banking sector. Specialised banks’ NPLs were Tk 5,669 crore, which is 13.87 per cent of the banking sector at the end of third quarter this year.

Back in 2020, the Bangladesh Bank gave special concessions on loan repayments to deal with the adverse impact of Covid-19 pandemic.

At that time, the regulator had issued instructions that a customer cannot be termed a defaulter even if he does not repay the loan. Later, in 2021, the central bank instructed that a customer will not default if they pay only 15 per cent of the due loan amount.

In June 2022, after the pandemic restrictions eased, the central bank announced that if a borrower pays up to 75 per cent of the instalments from October to December that year, they will not be declared a defaulter.

This is a Tk 642 crore decline compared to Q2 (April-June) of the same year, when NPLs had accounted for 10.11 per cent or Tk 1,56,039 crore of the banking sector’s outstanding loans of Tk 15,42,655 crore, Bangladesh Bank sources say.

NPLs had accounted for 8.16 per cent of the outstanding loans at the end of December 2022, which later increased to 8.8 per cent in March this year, say sources from the Bangladesh Bank.

The country’s default loans reached Tk 131,621 crore during the January-March quarter of 2023, so NPLs in the following quarter rose by Tk 24,418 crore.