The amount of classified loans in Bangladesh's banking system increased further by nearly 10 per cent or Tk 101.67 billion in the first quarter (Q1) of 2022, as the central bank revoked policy relaxation on loan repayment.
The non-performing loans (NPLs) grew by 9.85 per cent to Tk 1,134.41 billion during the January-March period of 2022, from Tk 1,032.74 billion in the preceding quarter (Q4 of 2021), according to the Bangladesh Bank (BB) latest statistics.
Actually, the amount of classified loans jumped by 19.30 per cent or Tk 183.55 billion until March 2022 year-on-year basis. It was Tk 950.85 billion as on March 31, 2021.
The share of NPLs also rose to 8.53 per cent of the total outstanding loans in the Q1 of 2022, from 7.93 per cent in the previous quarter - as per consolidated statement of classified loans covering both domestic and offshore banking units. It was 8.07 per cent as on March 31, 2021.
The amount of classified loans would go ballooning further, if the amount of write-offs is included in the figure.
The total outstanding amount of written-off credits stood at Tk 579.75 billion since 2003 until September last year.
In 2003, the central bank introduced the guidelines for writing off classified loans to improve loan recovery situation and make financial statements of the banks more transparent and accountable.
Although writing off loans is a global practice, it depends on capability of the bank concerned to write off its loans.
Before making any final decision in this regard, the bank management has to ensure cent-percent provisioning against the amount to be written off.
The amount of classified loans, covering substandard, doubtful and bad/loss portions of the total outstanding credit, reached Tk 13,297.36 billion as on March 31 on a consolidated basis. It was Tk 13,017.97 billion three months before.
"The classified loans increased during the period under review (Q1) mainly due to rise in the amount of total outstanding loans and advances in the banking sector," Md Serajul Islam, spokesperson of the BB, told the FE on Sunday, while explaining the rising trend in the NPLs.
When asked about the possible trend in the second quarter (Q2) of this year, he replied: "Hope for the best."
Meanwhile, the country's businesses sought loan moratorium until December 2022 because of "volatile business ambience" globally amid the war in Europe and resultant standoff in the West.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) placed the request, in a package of economic recovery recommendations, to the central bank on May 31, as its leaders fear a spectre of "another economic recession".
A delegation of the country's apex trade-body met BB Governor Fazle Kabir with the set of proposals, including suspension of loan classification until end of this calendar year.
"We're still scrutinising the FBCCI's proposals," a top central banker told the FE.
He also said the issue of suspending loan classification is set to be discussed at the next bankers' meeting, scheduled to be held at the BB headquarters on June 16.
"The central bank is likely to announce its decisions after the meeting," he added.
Senior bankers, however, said phasing out the relaxation on loan repayment policy was mainly responsible for increasing the amount of NPLs during the period under review.
© 2024 - All Rights with The Financial Express
