10 banks hold 65.1pc of bad loans: BB

Ten out of 62 banks in the country hold 65.1 per cent of all non-performing loans (NPLs) in the sector, according to Bangladesh Bank’s Financial Stability Report-2020 released last week.

Of the 10 banks, four are state-owned commercial banks (SOCBs), four private commercial banks (PCBs) and two each from both specialised banks (SBs) and foreign commercial banks (FCBs), said the report. 

It, however, did not mention the names of the banks. Among the banks, the top five held 47.5 per cent NPLs in the banking industry. 

Experts said the culture of impunity enjoyed by loan defaulters, political interference and lack of experience are the main reasons behind the high amount of NPLs.

The amount of bad loans in state-owned banks has increased the NPLs of the whole banking sector. 

Zahid Hussain, the former lead economist of the World Bank in Bangladesh, said political interference in approving loans was more widespread in state-run banks than in private banks. 

“Many weak state-run organisations get favour from state-run banks to take loans, but the organisations cannot return the loans. On the other hand, the accountability of state-run banks are weaker than those of private commercial banks,” he added. 

The report said that the gross NPLs decreased by Tk 6,050 crore from CY19 to reach Tk 88,280 crore in the calendar year (CY) 2020 owing to the loans moratorium facility offered by the Bangladesh Bank. 

Many borrowers repaid their loans last year despite the moratorium, which was the reason for the drop in default loans, said Md Serajul Islam, executive director and spokesperson of the BB.

In CY20, all banks except three state-owned commercial banks, two specialised banks and six private commercial banks maintained loan-loss provisions as per the regulatory requirement of BB, the central bank report noted. 

“Asset quality of banks improved last year as gross NPLs ratio showed a conspicuous drop driven by improvement in NPLs position of banks. However, maintaining asset quality amid the Covid-19 pandemic still seems to be a key challenge for the banking sector,” the report pointed out. The banking sector assets reached Tk 18,40,600 crore at the end of last year, registering a moderate growth of 13 per cent from CY19.

In last year, state-owned commercial banks had higher asset growth while the growth rate slowed down in specialised banks, foreign commercial banks and private commercial banks.

The banking sector of Bangladesh appeared to remain cautious yet resilient in CY20. The sector registered modest growth in assets compared to the preceding year, supported by a notable increase in deposit, as per the BB’s Financial Stability Report-2020.