Excess liquidity and non-performing loans (NPL) are posing threats to the improvement of banking sector, said speakers at a function in Dhaka on Tuesday expressing their concerns over the issues.
While addressing a workshop on the progress and weakness of credit operations of banks in 2016, bankers and economists said the country’s banking sector saw a moderate resilience in the current fiscal year and supported real economy to post around 7% growth rate throughout the year.
The total outstanding amount of loans and advances of the banking and non-banking financial institutions, as they told, was Tk685,264 crore over the same period.
Bangladesh Bank Deputy Governor Abu Hena Mohd Razee Hassan said: “The market has been gripped by excess liquidity, causing the central bank to increase the volume of 7-day, 14-day and 30-day bills in the ongoing fiscal year to help balance over all market liquidity.”
The NPL ratio issue turned out to be a serious concern as it jumped to 10.1% at the end of June, 2016 up from 8.8% in 2015, he added.
According to him, capital to risk weighted assets ratio reduced by a little margin, standing at 10.3% in June last year, a 0.5% drop since December, 2015.
“We are expecting that the banking sector will overcome the crisis through a smart solution to both the problems (excess liquidity and NPL).”
Aiming to deal with such a situation with success, Bangladesh Bank authorities brought some major changes in credit risk management guidelines, he added.