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Bangladesh Bank (BB) authorities have asked the commercial banks to significantly bring down the mounting NPLs (non-performing loans) buildup in the banking industry by the end of this December.

To attain the target, the central bank high-ups suggested top executives of the banks to implement all the instructions the banking regulator recently issued regarding the policy support to revive the ailing businesses and partial write-off facility to clean the balance sheets of banks.

The central bank top management led by its governor Dr. Ahsan H. Mansur made the instructions at the bankers’ meeting with the top executive of the country’s commercial banks at BB headquarters on Sunday.

TBP correspondent talked with nearly a dozen of the managing directors and chief executive officers of the scheduled banks to know the outcomes of the meeting but all of them agreed to share on condition of not disclosing their identities.

A managing director and chief executive officer of a private bank said the BB governor told them that ratio of classified loans in the banking industry rose to as high as nearly 36 per cent until September last, which is a serious concern for everyone.

The governor instructed the bank executives to pay serious attention in NPL management and execute all the instructions the regulator recently issued through circulars in respect to policy support for reviving the struggling businesses and partial write-off facility for the banks.

“If the banks implement the instructions properly, a significant volume of NPLs is expected to be come down by end of this December,” the BB governor was quoted as saying by the bank executive.

Another top executive of a private bank said they raised the problem that arises in term of providing policy support because a significant number of people coming to get the policy support do not have the capacity even to pay 2.0 per cent down payment, which is mandatory.

At the same time, he said the commercial banks need to see the cash flow of the policy-support-seekers for the next 10 years before approving the facility to them. “The real fact is majority of them do not have cash flow, which needs to be certified by a registered auditor. In fact, most of them are not eligible to get such support,” he said.

“If we allow them based on fictional cash-flow calculations, we would put into fresh problem, which the bankers don’t want,” he said.

Apart from NPLs, another bank top executive said they also requested the regulator to reduce the existing provisioning margin of 1.0 per cent in terms of financing SMEs. Earlier, the provisioning requirement was 0.25 per cent which was enhanced to 1.0 per cent few months ago.

The bankers also requested the central bank to align the nano-loan with CIB (credit information bureau).

The central bank also instructed the banks to pay more focus on digital transformation to ensure cashless society, SME and agri-financing.

The volume of classified loans in banking sector rose to Tk 6.44 trillion by end of September last which was 35.73 per cent of the loans disbursed by the banking system. The figure was Tk 4.20 trillion by March this year.

Founding chairman of Policy Exchange Bangladesh M Masrur Reaz said it is practically difficult to bring down the existing stock of NPLs because a significant portion of the money gone to ghost or weak company and a part of those was laundered.
If the bank executives become careful in NPL management through ensuring credit governance and properly handle risk management, the fresh flow of the possible classified loans can be avoided, he said.

Expressing concern over delay in implementing various institutional and legal reforms like expediting money loan court and out-of-court resolutions and introduction of distressed management company.

“It has been 15 months since the governance restoration has taken place. I think these (reform measures) should have in place now,” he added.