6-month ultimatum to 29 banks to reduce defaulted loans

Bangladesh Bank has set separate targets for 29 banks to control the rising non-performing loans in the country's banking sector. Banks whose non-performing loan rate is more than 20 percent will have to reduce it to below 20 percent within the next six months. And banks whose non-performing loan rate is between 10 and 20 percent have been instructed to reduce it to below 10 percent. If they fail to meet the target within the stipulated time, the relevant non-performing loans will have to be transferred to the Asset Management Company (AMC).

Bangladesh Bank Governor Mostaqur Rahman gave these instructions in a separate meeting with the managing directors (MDs) of 29 banks from July 12 to 19 regarding an action plan to reduce non-performing loans.

In the meeting, the Governor directed to prevent the creation of new defaulted loans, closely monitor rescheduled loans, strengthen the collection of arrears from large borrowers, and increase direct communication with customers in the agriculture and SME sectors. In addition, instructions have been given not to distribute dividends by showing unpaid interest as income by keeping toxic assets on the balance sheet.

In addition, emphasis was placed on repeatedly rescheduled loans (ADRs), exit facilities or speedy settlement through legal processes, initiatives to write off long-standing classified loans, and reducing non-performing loans within the framework of existing policies. At the same time, banks were urged to increase capital to strengthen their capital base.

According to Bangladesh Bank data, the default loan rate of 29 banks in the country was more than 10 percent at the end of March this year. Of these, Bank of Pakistan, First Security Islami Bank, Global Islami Bank, Union Bank, Padma Bank, ICB Islamic Bank, Social Islami Bank, Exim Bank, Janata Bank, IFIC Bank and Islami Bank have a worrying level of default loan rate.

Advertisement

By the end of March, the total non-performing loans in the country's banking sector had increased to Tk 5,88,704 crore, which is 32.26 percent of the total loans disbursed. At the same time, the provision deficit stood at about Tk 2,500 crore. This rate is the highest among South Asian countries.