Written by The Banking Post
Bangladesh Bank (BB) has instructed the commercial banks to somehow control the mounting growth of NPLs (non-performing loans) through intensifying cash recovery drives.
The central bank officials concerned also ordered the bankers to implement the tool of policy supports to revive the ailing businesses, which will also help reduce the leaping classified loans buildups reeling the banking industry now.
Officials concerned at the banking regulator led by its deputy director Dr. Md. Kabir Ahmed made the direction to the managing directors, chief executive officers and chief financial officers of the commercial banks at the meeting titled ‘The NPL Resolution’ held at the BB headquarters on Wednesday.
The meeting comes after the ongoing review mission team of the International Monetary Fund (IMF) as part of its $5.50 billion lending package to stabilise Bangladesh’s macroeconomic situation expressed their serious concern over the rapidly swelling NPLs buildup in banks.
In the closed door discussion, the central bankers also sought suggestions and possible ways to contain the growth of the classified loans, which becomes a serious headache to the commercial lenders.
Managing director of a commercial bank said the BB officials informed them that the NPLs in banking sector rose to over 30 per cent by the end of September last, which surprised the visiting IMF’s review team members.
Citing the central bankers, the seasoned banker said, commercial banks need to keep another 20 per cent of the fund to maintain CRR and SLR. “How do the banks support the economy with remaining 50 per cent of the fund,” he said with quoting a central banker.
“We’re asked to reduce the NPLs at anyhow. We are also asked to intensify cash recovery drives,” he said.
Another bank top executive said they have made some suggestions. Citing the circular number-7 issued by the BB’s BRPD (banking regulation and policy department), he said the circular stated that those who become defaulted within June 30, 2025 will be eligible to get the policy support facility.
“But the problem is there are some businesses became defaulted after June last. So we requested the BB officials to extend the deadline until December next,” he said.
A chief financial officer (CFO) of a private commercial bank said some of the bankers raised the issue of slow progress in the legal system in settling loan-related disputes.
Anyone willful defaulter can submit writ petition in the court and the court often issue stay order against the loan recovery procedure and the process got stuck up for years.
“So, we suggested the BB to convince the government so that the court can allow writ petition with a condition of depositing minimum 5.0 per cent of the liabilities as down payment,” he said.
At the same time, the bankers also suggested for increasing the number of courts in settling such disputes to bring some sort of acceleration in the settlement process.
