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DCCI: NPLs threaten banking sector stability

  • Published at 09:59 pm February 24th, 2019
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DCCI President Osama Taseer and Bangladesh Bank Governor Fazle Kabir at a dialogue on monetary policy statement, held on Saturday,February 23, 2019 at DCCI auditorium, Dhaka Courtesy

Previously in June 2018, total bad loans in the banking sector was Tk89,340 crore, or 10.41% of total disbursed loans

DCCI President Osama Taseer on Saturday claimed soaring non-performing loans (NPLs) in the banking sector is a threat to stability since they burden the private sector with higher costs of capital and squeeze credit flow to industries.

Osama came up with observation while speaking at a dialogue on "Monetary Policy Statement: Implication on Private Sector", organized by the chamber at its auditorium in Dhaka.

According to recent Bangladesh Bank data, the amount of NPLs in the country's bank sector stood at Tk99,370 crore, or 11.45% of disbursed loans as of September 2018. Furthermore, NPLs rose by a staggering Tk10,030 crore in a period of three months from July to September last year.

Previously in June 2018, total bad loans in the banking sector was Tk89,340 crore, or 10.41% of total disbursed loans.

Osama furthered: "Other challenges that may hold back the desired private sector growth and economic mobility include capital flight, weak exchange rate, unstructured capital market, slimming FDI [foreign direct investment] inflows, unemployment, negative trade balance, and a lack of export diversification." 

Speaking as the chief guest at the dialogue, Bangladesh Bank Governor Fazle Kabir said that banks should be watchful of credit quality and monitor that the credit taken is being utilized properly. "NPLs are coming down, as of November 15, 2018 it is 10.29%," he informed.

The trade body also demanded a private sector-friendly monetary policy to attract investments into the country.

Terming the recently announced monetary policy statement (MPS) as cautionary, Osama added that the unchanged advance deposit ratio (ADR), unchanged cash reserve ratio, 6% repo and 4.75% reverse repo rates, 16.50% private sector credit growth, 10.9% public sector credit growth, and 15.90% domestic credit growth targets "may enrich the private sector credit flow and scale up industrialization, employment and trade", resulting into the expected GDP growth for the current fiscal year. 

“The private sector is the engine of economic growth as we always focus on increased private sector credit growth,” said the central bank governor. 

In the current MPS, the central bank has targeted private sector credit growth at 16.5% which went down to 13.3% in December 2018 due to factors like the national election. 

The governor assured trade leaders of considering their demands of consultation with the stakeholders before MPS announcement, adding that Bangladesh Bank has always been supportive of entrepreneurs especially of the small and medium-sized enterprises (SMEs).

While delivering the keynote presentation, DCCI Senior Vice President Waqar Ahmad Choudhury termed the MPS as a catalyst for private sector growth.

He also highlighted some challenges for the private sector, explaining that increase in non-food inflation and increase of purchasing power may raise inflation to 6%.

"Public sector credit growth reached double digits to 13.30%, from negative 2.50%. This growth trend may shrink the space for desired growth of private sector credit," he added.