BB wants details about steps to reduce NPL by banks, DFIs

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Siddique Islam brThe Bangladesh Bank (BB) has asked 11 commercial banks and development financial institutions (DFIs) to inform details about the steps taken to reduce their non-performing loans (NPL) immediately. brThe banks have been selected on the basis of the percentage of classified loans against their total outstanding position that is hovering between less than 10 per cent and over 44 per cent, officials said. brThe 11 banks include eight state-owned banks and the DFIs. brThe central bank took the move against the backdrop of a rising trend of NPL in June this year despite strict monitoring and execution of tougher laws against delinquent borrowers. brDefault loans increased by 12.08 per cent, or about Tk 26.95 billion, in the last one year to June 2008 due to poor loan recovery performance of some the commercial banks during the period.brThe amount of NPL reached Tk 249.97 billion as on June 30, 2008. The amount was Tk 223.02 billion a year back, according to the central bank statistics. brWe will fix the next strategy after receiving replies from the banks concerned in this connection, a BB senior official told the FE, adding that the percentage of classified loan has slightly reduced due mainly to increased disbursement of fresh credit during the period. brDuring the last one year, the share of classified loans of the total outstanding loans of the country's banking system declined by a mere 0.94 per cent, the BB's data showed. brThe share of the classified loans in the total outstanding loans was 13.02 per cent on June 30, 2008. The share was 13.96 per cent one year ago. brThe failure of the state-owned commercial banks (SCBs) to recover overdue loans was mainly responsible for negligible improvement in the classified loans situation. brFour SCBs have already taken various measures to gear up their recovery drives to recover default loans, particularly from their respective top 20 defaulters.brWe have already taken a series of measures to strengthen recovery drives aiming to reduce the amount of default loan, Managing Director and Chief Executive Officer of the Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told the FE Sunday. brHe also said the Agrani Bank Limited will shortly inform the central bank about the steps that have already been taken to recover default loans. brDuring the period, the total amount of default loans with the SCBs climbed to Tk 152.89 billion against Tk130.58 billion of total outstanding loans. brOn the other hand, the total amount of classified loans with the private commercial banks (PCBs) rose to Tk 57.52 billion from Tk 51.50 billion during the period, the data revealed. brThe classified loans of nine foreign banks (FBs) stood at Tk 2.30 billion against their total outstanding loans of Tk 152.60 billion in June this year. brThe default loans with five DFIs stood at Tk 37.25 billion against the total outstanding of loans of Tk 142.13 billion.brThe SCBs and DFIs continue to have very high NPLs mainly due to substantial loans provided by them on considerations other than commercial and under directed credit programmes during the 70s and 80s. brPoor appraisal and inadequate follow-up and supervision of the loans disbursed by the SCBs and DFIs in the past eventually resulted in massive booking of poor quality assets, which still continue to remain significant in the portfolios of these banks, the central bank said in its latest annual report. brThe report said recovery of NPLs, however, witnessed some signs of improvement, mainly because of the steps taken with regard to internal restructuring of these banks to strengthen their loan recovery mechanism and recovery drive and write-off measures initiated in the recent years.br