The Bangladesh Bank (BB) has asked the scheduled banks to reduce their volume of classified loans through strengthening monitoring of such loan accounts amounting to Tk 1.0 billion and above.
"We've taken the fresh step to reduce both the amount of default loans and the number of loan defaulters through boosting recovery of such loans," a BB senior official told the FE.
Under the latest measure, all the banks will have to form special monitoring cell, headed by the deputy managing director (DMD) concerned, to monitor the loan accounts amounting to Tk 1.0 billion and above, according to a notification, issued by the BB on Monday.
The special monitoring cell will have to submit 'quarterly statement of classified loans amounting Tk 1.0 billion and above' to the board concerned, mentioning progress of recovering such loans.
The central bank also included a prescribed format of the quarterly statement with the notification.
The management of each bank will formulate a time-bound action plan for recovering such default loans.
The board of directors will give necessary directives after revaluating implementation of the plan. The board will also ensure review of the quarterly statement, the BB notification added.
Both the management and the board of a bank will be responsible for recovering such loans through due implementation of the notification, according to the BB official.
The statement from October-December period of 2019 to April-June of 2020 will be submitted to the central bank in soft and hard copies.
Later, the statement will be submitted to the central bank using the BB's web portal and EDW (enterprise data warehouse) software from April-June period of 2020.
The BB's latest initiative came against the backdrop of the rising volume of default loans in the country's banking system in the recent months.
The volume of non-performing loans (NPLs) soared by more than 18 per cent to Tk 1,108.73 billion in the first quarter (January-March) of the current calendar year from Tk 939.11 billion in the previous quarter, the BB data showed.
"The BB's latest initiative may help reduce the volume of NPLs in near future," Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), told the FE while explaining the possible impact on the notification.
He also said most of the banks have already formed such cell to recover their stressed assets.
"But we need a strong legal framework to speed up recovery process of classified loans," added Mr. Rahman, also managing director and chief executive officer of the Dhaka Bank Limited.
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