Classified or non-performing loans in Bangladesh's banking sector hit an all-time high at Tk 1.25 trillion in the first half of the current calendar year despite policy perks provided to stem the tide.
The H1 volume of non-performing loans (NPLs) jumped by more than 21 per cent or Tk 219.84 billion to Tk 1252.57 billion as on June 30 from Tk 1032.74 billion six months before, according Bangladesh Bank's latest statistics, released Thursday.
Officials at the BB, however, say the amount of NPLs increased in the second quarter (Q2) compared to the first quarter (Q1) of this calendar year because some unclassified loans entered into classified territory following inspections by the central bank.
"The amount of NPLs has been enhanced during the period under review as the High Court vacated some write petitions relating to loan classification," a top central banker told the FE while explaining the latest situation on loan classification.
The volume of NPLs grew by more than 10 per cent or Tk 118.17 billion to Tk 1252.57 billion as on June 30 from Tk 1134.41 billion three months before, the BB data show.
Talking to the FE, Md Serajul Islam, the central bank spokesperson, said the amount of NPLs increased slightly in the Q2 of 2022 due mainly to higher volume of total outstanding loans in the banking sector.
The amount of outstanding loans rose by over 5.0 per cent to Tk 13985.92 billion as on June 30 from Tk 13297.36 billion three months ago, according to the central bank's statistics.
The share of classified loans also rose to 8.98 per cent of the total outstanding loans in the H1 of 2022 from 7.93 per cent as on December 31, 2021 - as per consolidated statement of classified loans covering both domestic and offshore banking units. It was 8.53 per cent as on March 31, 2022.
Classified loans cover substandard, doubtful and bad/lost portions of the total outstanding credits, which reached Tk 13985.92 billion as on June 30 on a consolidated basis. It was Tk 13017.97 billion six months before.
"Many borrowers could not avail the latest BB policy on loan- classification relaxation," Syed Mahbubur Rahman, managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, told the FE, describing the reasons for loan classification.
The central bank has already revived its relaxed loan-repayment policy to keep the ongoing economic activities stable despite long-term negative impact of the Covid-19 pandemic as well as the Russia-Ukraine war, officials say.
Under the relaxed stance, the borrowers from large industries are allowed to repay their term loans which became unclassified on 01 April in phases - 50 per cent by April-June of this calendar year, 60 per cent in July-September, and 75 per cent in the final quarter of 2022 - without becoming defaulter.
For cottage, micro, small and medium enterprises (CMSMEs), the borrowers must repay 25 per cent of their payable loans in the second quarter, 30 per cent in the third quarter, and 40 per cent in the last quarter of this year - to avoid falling into the defaulter category, according to a notification issued by the central bank on June 22.
Only the term loans, which carry a repayment period of more than a year, will qualify for the fresh relaxed classification rules, it adds.
The remaining amount of the installments will have to be repaid in the same installments of one year after expiry of the loan period, according to the officials.
Mr Rahman also says the amount of NPLs is likely to fall in September following the latest BB policy on loan rescheduling and restructuring.
Earlier on July 18, the central bank relaxed loan-rescheduling and- restructuring policy to facilitate country's overall business activities.
Under the new policy, borrowers are allowed to get rescheduled their classified loans for fourth time instead of the previous three times, in the interest of recovery of bad loans.
During the first half of 2022, the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to Tk 554.29 billion from Tk 449.77 billion as on December 31 last. It was Tk 487.37 billion in Q1 of 2022.
On the other hand, the total amount of classified loans with 42 private commercial banks (PCBs) ballooned to Tk 626.77 billion as on June 30 last from Tk 515.21 billion in the final quarter of last year. It was Tk 578.04 billion as on March 31 last.
The NPLs from nine foreign commercial banks (FCBs) rose to Tk 29.57 billion during the period under review from Tk 27.85 billion in the Q4 of 2021. It was Tk 28.84 billion of the Q1 of this calendar year.
The classified loans with three development-finance institutions (DFIs) also rose, to Tk 41.84 billion as on June 30 last, from Tk 39.91 billion six months before. It was Tk 40.15 in the Q1 of 2022.
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