The central bank has asked all the scheduled banks for taking effective measures to reduce the volume of classified loans significantly by the end of this year.
The bankers have, however, sought judicial support to this end.
The directive was issued at a meeting of bankers held at the Bangladesh Bank (BB) headquarters in Dhaka on Wednesday with BB Governor Fazle Kabir in the chair.
A tripartite meeting of Law Commission, the BB and senior bankers is expected to be held soon to gear up settlement of such loan disputes, meeting sources said.
"We may invite the chairman of Law Commission to attend the next bankers' meeting to inform [him of] the legal complexity for settling classified loan disputes," a BB senior official told the FE after the meeting.
The BB and the commission already sat months ago to discuss issues like the functioning of money loan courts, strengthening recovery of NPLs and Credit Information Bureau-related matters.
On May 14, the Law Commission at the meeting discussed establishment of commercial courts aiming to attract foreign direct investment through resolving disputes on trade, commerce and banking promptly.
At the meeting, the central bank assured the country's top bankers of extending its support, if necessary, to reschedule loans that will help reduce the volume of defaulted loans, sources said.
"We'll help the bankers reschedule loans within the existing rules and regulations," the central banker said in reply to a query.
Talking to the FE, another official said the BB asked the banks for taking measures to bring down the volume of percentage of classified loans to around 10 per cent of total outstanding loans by the end of this year.
The BB's latest move came against the backdrop of a rising trend in the non-performing loans (NPLs) in the country's banking sector in recent months despite its close monitoring.
The amount of classified loans in the banking industry reached an all-time high of nearly Tk 1.0 trillion in September ahead of the upcoming national polls.
The volume of defaults jumped by nearly 34 per cent or Tk 250.67 billion to Tk 993.70 billion as of September 30, from Tk 743.03 billion as of December 31, 2017, the BB data showed.
The share of classified loans also rose to 11.45 per cent of the total outstanding credits during the period under review from 9.31 per cent nine months before.
The loans include substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 8,680.07 billion as of September 30, 2018, from Tk 7,981.96 billion as of December 31, 2017.
It was Tk 7,527.30 billion as of September 2017.
"We've sought judicial support to reduce the volume of NPLs," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, told reporters after the meeting.
He said the banks need the legal support to bring the defaulters, particularly the wilful ones, to the negotiating table to recover the NPLs.
At the meeting, the bankers have also been asked to take necessary measures to meet the overall shortfall in provisioning against their loans immediately.
The total amount of provisioning shortfall rose by over 20 per cent to Tk 81.27 billion as of September 30 from Tk 67.67 billion nine months ago, according to the BB's latest statistics.
Higher growth in NPLs pushed up the amount of provisioning shortfall with the banks during the period under review, according to the BB officials.
A total of 12 out of 57 banks failed to keep the requisite provisions against loans, particularly the NPLs, in the third quarter (Q3) covering July-September period of 2018.
Of them, the BB data showed, four are state-owned commercial banks and others are private lenders.
Mr Rahman, also managing director and chief executive officer of Dhaka Bank Limited, said a few banks, particularly the private ones, have already taken initiatives to meet their provisioning shortfalls.
The meeting also discussed issues like latest situation on both national and global economics, use of electronic fund transfer and trend in foreign exchange market.
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