Non-performing loans rise by Tk3,899cr in 3 months

Non-performing loans (NPLs) in the banking sector rose by Tk 3,899.12 crore in April-June this year despite the central bank’s regulatory forbearance after the coronavirus outbreak.

According to Bangladesh Bank data, at the end of June, the defaulted loans stood at Tk 98,164.31 crore, 8.61 per cent of the sector’s total outstanding loans.

Bad loans were at Tk 94,265.19 crore or 8.48 per cent of the total outstanding loans three months earlier.

Bankers said default loans went down last year as the central bank offered a loan moratorium facility on instalments for all clients. But this year, the facility has been provided based on bank-customer relationships, which was the main reason for the increasing trend of NPLs.

Non-performing loans will increase further as most clients cannot repay due to the ongoing Covid-19 pandemic, said Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank.

“We did not extend the deferral facility for bad customers, which was the reason for the increasing trend of NPLs,” he added.

Previously rescheduled loans have gone unpaid, and some loans have been newly classified in the second quarter, said Dhaka Bank MD Emranul Huq.

According to BB data, total outstanding loans at 59 scheduled banks stood at Tk 11,39,776.96 crore at the end of June this year. 

Businesses and traders enjoyed the moratorium on loan instalment throughout last year. As a result, borrowers were relieved from default without paying any instalments. But, the ongoing moratorium on loan instalment depends on the bank-customer relationship, and it will end on August 31 this year. 

However, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) requested the Bangladesh Bank extend the loan moratorium facility until December 31, 2021.

The country’s apex trade body sent a letter to Bangladesh Bank Governor Fazle Kabir on August 5 to extend the period of non-classification of loans by two more months until December 31 to help businesses recover from the pandemic shock. But, the central bank is yet to announce a decision.

BB had earlier extended the moratorium facility several times, considering the request of several business organisations, including the FBCCI, BGMEA and BKMEA. 

However, bankers have opposed the request of FBCCI.

Three private commercial banks’ CEOs, declining to be named, said BB should not extend the moratorium.

They said businesses and traders showed various excuses due to the lockdown but the economy has been reopened. They said if they don’t receive payments, how will they run operations and survive.

“It is a baseless proposal from the country’s apex trade body,” they told The Business Post.