Banks' non-performing loan (NPL) buildup ballooned over 25 per cent to a record-high of over Tk 1.82 trillion at the end of March (Q1) this year over December 2023, sources at Bangladesh Bank (BB) said.
Bankers and economists said pressure on the banking sector continued mounting under the load of NPLs or classified loans which weakened the financial health of the key financial sector.
In fact, they think, the actual size of the stressed assets in banks would be much higher than the NPLs amount if the volumes of loan rescheduling and write-off are taken into account.
According to the central bank data released on Thursday, the bad loans increased by Tk 364 billion in just three months from December 2023 when the volume of classified loans was nearly Tk 1.46 trillion.
At the end of March this year, total disbursed loans stood at Tk 16.41 trillion, of which Tk 1.82 trillion became defaulted, the highest in the history of Bangladesh.
With this latest surge, the overall ratio of NPLs or classified loans stood at 11.11 per cent - 2.11 percentage points higher than the December figure.
In terms of the category of banks, the volume of classified loans in the state-owned commercial banks (SCBs) like other occasions remained high in total outstanding.
The total outstanding of loans in the SCBs stood at over Tk 3.12 trillion until March 2024, of which Tk 843 billion or 27 per cent became defaulted. The volume of bad loans in the SCBs surged by 7.0 percentage points in March from 20 per cent recorded over the December-end period.
The share of NPL in private commercial banks (PCBs) increased by 1.35 percentage points to 7.28 per cent or Tk 889 billion against their disbursed loans of Tk 12.21 trillion.
The share of bad loans in foreign commercial banks (FCBs) against their outstanding of Tk 664 trillion reached 5.20 per cent (Tk 34.55 billion) until March last from 4.82 per cent.
The rise in bad loans is also observed in the operations of specialised banks where the ratio of NPL rose to 13.88 per cent (Tk 55.56 billion) out of their outstanding loans of Tk 400 billion in March from 13.87 per cent recorded three months earlier, according to the official data.
In terms of provisioning, the provisioning-fund deficit against bad assets in commercial banks increased to Tk 266 billion by end of March in 2024, up from Tk 193 billion recorded in December in 2023, the data showed.
Talking to the FE, BB spokesperson Md Mezbaul Hoque said the volume of NPL in the country's banking industry rises, which is a concerning issue.
He said they just received the NPL-related data and would soon start examining the factors contributing to the surge and take actions accordingly.
Seeking anonymity, a BB official said the central bank in early February last announced a roadmap with 11-point measures to cut the NPL stress below 8.0 per cent within June 2026. "Where are the measures? Why has it (NPL) increased significantly," the official said, raising questions over implementations of the NPL-containing steps.
The burden will not be reduced by only making strict statements. It will be lessened if the steps are periodically implemented, the central banker said.
Managing director and chief executive officer of Dhaka Bank Emranul Huq said it is very alarming as the volume of bad loans keeps soaring. The banks need to pay more focus on cash recovery to narrow down the burden. Prominent economist Professor M.A. Taslim said the growing NPLs is not just a burden for the banks, it is the burden for the common people as banks will pass it on to the people by raising the cost of funds.
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