High NPL rates at state-run banks worry IMF mission

The International Monetary Fund (IMF) mission has expressed “grave concerns” over the high non-performing loans (NPLs) rate at Bangladesh’s state-run banks. 

According to Bangladesh Bank (BB), eight state-run banks account for 47 per cent of the total NPLs in the banking sector.

The visiting IMF mission expressed the concern at a meeting held at BB headquarters on Sunday with Governor Fazle Kabir. The mission also met deputy governors Ahmed Jamal, Kazi Sayedur Rahman, AKM Sajedur Rahman Khan and Bangladesh Financial Intelligence Unit chief Md Masud Biswas.

A six-member IMF’s Article IV Consultation Mission, led by IMF’s Mission Chief for Bangladesh Rahul Anand, is now assessing the country’s overall macro-economic situation.

A senior central bank official said the mission asked BB about the reason behind the high amount of NPLs and weak asset quality at the state-run banks.

The official said that BB told the mission that state-run banks provide numerous banking services free of cost.

It was an introductory meeting of the IMF mission with the BB governor and several more meetings with the BB are scheduled till December 19, said Bangladesh Bank Executive Director (Research) Md Habibur Rahman. 

The meetings discussed the country’s macro-economic situation, growth and inflation developments, outlooks and risks, implementation of stimulus packages, their impacts, challenges, progress with green finance to tackle climate and developmental goals.

They also discussed the reserve situation, exchange rate and foreign exchange cash flow, monetary policy in FY21, monetary policy stance and monetary policy objectivities for FY22 and plans for normalisation given low rates and high liquidity.

Said that the BB monetary policy, price hike situation, current inflation rate and foreign exchange market, and other banking sector issues were also discussed at the meetings. 

The general inflation rose to 5.7 per cent in October, which was 5.59 per cent in September, as prices of both food and non-food items are showing upward movement. 

He said they informed the mission that BB formulates the monetary policy to keep inflation under control.

BB officials said that the IMF mission would submit their recommendations on fixing the banking sector and weakness in the macroeconomy after their visit.

IMF’s Article IV Consultation Mission visits its member countries, including Bangladesh, every year to assess the weakness and strength of economies.