NPLs hit Tk 1,20,656 crore

Amid high pressure from International Monetary Fund (IMF) to reduce bad loans to a minimal level, non-performing loans (NPLs) in the country’s banking sector hit Tk 1,20,656 crore at the end of December last year.

According to industry insiders and experts, this has happened mainly due to the partial withdrawal of the relaxed loan repayment facilities.

Bad loans rose by Tk 17,383 crore in the past year as the NPLs were at Tk 1,03,273.78 crore at the end of December 2021, as per the latest data of Bangladesh Bank (BB).

Industry insiders said that borrowers enjoyed easy loan repayment facilities in 2020 and 2021 due to the Covid-19 pandemic but since those facilities have lifted, this has impacted the bad loans.

They said that some borrowers are now facing difficulties to repay the loans due to the ongoing stress on the economy. There are also some borrowers who are not repaying the loans willingly.

A senior BB official told The Business Post that borrowers were allowed to avoid being classified as a defaulter if they did not clear their payable instalments in 2020 and 2021 due to the pandemic.

As a result, the defaulted loans did not rise drastically but the easy loan repayment facility has ended now. However, borrowers enjoyed partial loan repayment facilities last year.

NPLs accounted for 8.16 per cent of the total disbursed loans, which was at Tk 14,77,788.76 crore at the end of December last year.

NPLs decreased by Tk 13,739.56 crore in the December quarter compared with the September quarter of last year.

NPLs in the banking sector were historically high at Tk 1,34,396 crore at the end of September last year.

No actual recovery

“There are a handful of banks that are now recovering some through loan rescheduling. But apart from that, there is no actual recovery from the borrowers now,” said Jamuna Bank Managing Director (MD) and CEO Mirza Elias Uddin Ahmed.

He said that the bad loans slightly fell in the December quarter compared to the September quarter due to the growing number of loans rescheduled by lenders.

A large number of banks rescheduled their bad loans at the yearend period aiming to clean their balance sheet, he added.

The senior banker also said that the upcoming days are hugely uncertain as the economy is facing several difficulties due to the Russia-Ukraine war. Businessmen are also struggling because of the US dollar crisis.

Of the total NPLs in the banking sector, state-run banks’ bad loans stood at Tk 56,460 crore or 20.28 per cent of the loans they disbursed, and private commercial banks are at Tk 56,438.66 crore or 5.13 per cent of the loans they disbursed.

Foreign banks’ NPLs stood at Tk 3,048 crore or 4.91 per cent of their disbursed loans and specialised banks’ stood at Tk 4,709 crore or 12.80 per cent of the loans they disbursed.

Provision shortfalls in banks

At the end of December 2022, the country’s banks faced Tk 11,009.29 crore as provision shortfall due to their growing bad loans, according to BB data.

State-run banks faced Tk 8,828.09 crore as provision shortfall while the amount for private commercial banks was Tk 2,745.98 crore.

As per banking rules, banks have to keep 0.5 to 5 per cent of their operating profits as a provision against general category loans; 20 per cent against classified loans of substandard category; 50 per cent against classified loans of doubtful category; and 100 per cent against classified loans of bad or loss category.

Govt to meet IMF conditions

According to officials concerned, the government plans to take several initiatives to reduce the growing number of NPLs to meet the conditions of the International Monetary Fund (IMF).

Recently, IMF approved a $4.7 billion loan for Bangladesh to support its economy but the country will have to meet some conditions imposed by the global lender.

At a recent meeting with IMF, the government promised that it will reduce the number of bad loans. As part of that, the government plans to reduce bad loans of state-run banks to 10 per cent and private banks to 5 per cent.

At present, the bad loans of state-run banks are at 20.28 per cent and private banks’ NPLs at 5.13 per cent, as per BB data.