BB governor stresses small loan disbursement

Bangladesh Bank Governor Fazle Kabir has expressed concern over the rising trend of Non-Performing Loans (NPLs) and told bankers to end the culture of large loan disbursement. The governor stressed the need for good governance to restore stability to the banking sector. “We must shy away from disbursing loans above Tk500 crore and prefer small credit for small and medium enterprises as large ceiling possesses a greater risk of default,” he said. The central bank governor was addressing the Financial Stability Report-2016 unveiling programme held in the BB headquarters in the capital as the chief guest. “The financial sector managed to continue its strong position and the country’s gross-domestic product exceeded 7% mark. Moreover, inflation rates dropped to 5.9%. Most indices of the sector saw notable achievement in the year,” added the governor. BB Deputy Governor SK Sur Chowdhury chaired the event while other speakers included Deputy Governors Abu Hena Mohammed Razee Hassan and SM Moniruzzaman, and Anis A Khan, chairman of Association of Bankers, Bangladesh. They all seconded the governor statement preferring small loans and suggested that banks remain aware that loans are not sanctioned only for a particular sector. Meanwhile, the gross NPL ratio in the banking sector jumped to 9.2% last year, up from 8.8% a year ago, according to the report. Outstanding loans throughout 2016 totalled Tk6,737 billion, including the gross NPL of Tk622 billion, it reads. The top five banks were responsible for over half (51.8%) of all NPLs. “Last year NPLs increased slightly emanating from deterioration in the quality of loan portfolios mostly in the state-owned commercial banks and specialised development banks,” the report adds. Over the same period, out of 57 banks, only three state-owned banks and three private commercial banks managed to maintain provisions keeping in line with BB policies. The net NPL ratio soared to 4.5% last year, which is 0.3% higher than  in 2015. This increase is mainly caused by higher provision shortfall of Tk47.7 billion, the report mentioned. The total loans which were rescheduled at least once reached 10.5% of the banks’ total outstanding loans, of which 75.8% is unclassified. Commercial loans are topping the list of NPLs with 23.4% share followed by 12.6% and 9.8% of apparel sector and large industries respectively.