Banks mount recovery drives as NPL volume on upturn

Commercial banks have expedited their loan-recovery drives to bring down the volume of non-performing loans (NPL) to a reasonable level by the December deadline.
Officials of a good number of commercial banks said the default loan is expected to come down within this month as a result of their latest drives.
They also have taken necessary precautionary measures in respect of sanctioning fresh credits to avoid further deterioration of the NPL status.
Some CEOs (chief executive officers) both from the private and state-owned commercial banks apprised the FE of the latest state of default loans when asked Saturday about the rising NPLs in the banking system.
Bangladesh Bank Governor Dr. Atiur Rahman asked the CEOs during his latest meeting with the bankers to bring down the loads of bad loans within this passing December.
The profitability of the banks erodes fast when the non-performing loans pile up.
According to central bank statistics, at the end of September, the total defaults amounted to Tk 572.9 billion or 11.60 per cent of the total outstanding loans.
The statistics also show that it was 8.93 per cent in December 2013.
Between January and September, the state-owned banks saw their default loans increase by Tk 41.91 billion, the private banks by Tk 78.78 billion, the foreign lenders by Tk 3.35 billion and the specialised banks by Tk 43.04 billion.
Loan defaults rose by Tk 75.89 billion in January-March, Tk 31.72 billion in April-June and Tk 59.46 billion in July-September periods.
Syed Abdul Hamid, managing director and CEO of the state-owned Agrani Bank, told the FE that his bank has taken a number of measures to trim down the NPLs.
"We've talked to some of our big clients and they assured us of paying their instalments within this December," Mr Hamid said.
He hopes to recover at least Tk 5.0 billion within this month as part of the drive.
The banker, however, appeared frustrated over the poor services being provided by the state-owned commercial banks in terms of netting back the money lent out to borrowers.
He observed officials at the state-owned commercial banks not so serious as the private commercial banks' officials are.
"If our services become fast like the private banks', then a part of our sanctioned loans will not become classified," he said.
Ali Reza Iftekhar, the chief executive officer at private commercial bank EBL told the FE that the ongoing drive would derive benefits in terms of cutting down the NPLs.
"We expect that the default will go down as we're now on a strong drive for recovery of loans," Mr Iftekhar said.
Such drive, he suggests, should continue at least through 2015.
"In my view, such drive will help develop the situation of defaults," he said.
Aminur Rahman, a former managing director at the state-owned Janata Bank, said the rate of NPL rises following fluctuation of prices of commodities on the international market.
He mentioned that a good part of the NPLs is related to the traders who import sugar and edible oils.
Prices of commodities on the international market fluctuate fast. Many sugar importers are now struggling to sell off their stocks amid the international market slump.
Mr. Rahman, who is an adviser of the newly launched Union Bank, said overall business environment is also equally important to bring down the default loans.
The Bangladesh Bank governor at the meeting with the CEOs last week expressed grave concern over the swelling of the volumes of NPL.
He predicts that the banking sector's defaults might cross Tk 600-billion mark if the trend continues until December.
He asked the bankers to bring down the loan defaults by any means.
The governor advised the banks to sit together with the big borrowers who have failed to repay loans and come up with a joint proposal instead of handing in individual ones.
jasimharoon@yahoo.com