In the third week of December last, the central bank had asked the banks to bring down their classified loans to below 10 per cent before the expiry of the calendar year 2014.
The banks obliged. The average share of the classified amount in their total outstanding loans came down to 9.69 per cent at the end of last quarter of 2014 from that of 11.6 per cent estimated at the end of the previous quarter.
Nearly 2.0 per cent fall in classified loans is attributed largely to large-scale loan rescheduling, write-off and 'strong' recovery drive by the banks.
A top Bangladesh Bank (BB) official has also listed the banking sector regulator's intensive monitoring and supervision as one of the reasons for the non-performing loan (NPL) scaling down to single digit.
But year-on-year estimates tend to give an altogether different picture.
The share of NPL of the public sector banks at the end of 2013 was 19.76 per cent. It went up to 22.23 per cent as of December 31, 2014. The private sector banks also had a nominal rise in NPL over a period of one year.
However, inclusion of the BASIC Bank, which used to be categorized as a specialized bank until recently, in the list of the state-owned commercial banks, might have contributed to the rise in NPL of the public sector banks.
The BASIC was hit by large loan scams recently. It is now loaded with a heavy burden of bad loans. At the end of 2014, nearly 53.5 per cent of the credit disbursed by it turned classified.
But, according to the central bank statistics, the state-owned four commercial banks -- Sonali, Janata, Agrani and Rupali -- had been successful in bringing down their NPL by Tk.43 billion in between the third and fourth quarters of 2014.
The private sector banks did not also lag behind. Their NPL came down by nearly Tk.38 billion during the same period.
This sort of success in bringing down the NPL during an otherwise dull and drab business environment tends to evoke scepticism.
The banks were also unusually 'successful' in trimming the size of their respective NPL following the relaxation of the loan scheduling facility by the central bank at the end of the last quarter of 2013. At the fag end of last month of 2013, the BB had issued a circular allowing the banks to fix down payment and time-limit for repayment according to, what is described, bank-client relationship. In fact, that was licence to window-dress the NPL according to the wishes of individual banks. The relaxation had produced a 'spectacular' result -- the overall NPL declined by over 4.0 per cent in just a quarter's time to stand at 8.93 per cent at the end of 2013.
But the rosy picture was a short-lived one. In a gap of just nine months the NPL soared to 13 per cent, much to the worries of the central bank and others relevant to the banking industry.
Will the decline in NPL as recorded by the central bank in the case of last quarter of 2014 sustainable? If there was no large-scale window-dressing, then it would be. Otherwise, a repetition of the 2013 experience is most likely.
There is no denying that despite a marginal year-on-year increase in the size of the NPL, the private sector banks, as a group, have relatively better NPL situation -- below 5.0 per cent. But the actual NPL figure could be bigger since a good number of banks, as the reports in the media indicate, have produced the window-dressed estimates of their classified loans.
The presentation of lower NPL figures on the part of private banks is not for putting up a better public image but for enabling them to offer 'respectable' amount of dividends to the shareholders, particularly to their sponsor-shareholders.
But window-dressing has its cost. The banks, too, are aware of it. Yet they tend to overlook the issue for the greater 'interest' of the shareholders. The provision of bad loan write-off is often abused as it happens in the case of loan-rescheduling.
The banks are supposed to make efforts to recover the written-off loans. But, unfortunately, the banks are found to be least interested to do that.
The issue of engaging asset-management companies to recover banks' money from delinquent borrowers was discussed at different levels some years back. But it is hardly discussed these days.
Banks, both private and public, have written off bad loans worth billions of taka. They need to make serious endeavours to recover the money. The recovery bids through courts are producing no tangible results. There should be other lawful means, even the harsh ones, to get the money back by the banks.
   zahidmar10@gmail.com
NPL situation: Will banks revisit 2014 experience?
Shamsul Huq Zahid | Published: February 11, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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