Relaxed rescheduling policy, one off exit scheme start paying off
Banks’ non-performing loans (NPLs) declined by Tk21,957.31 crore in three months till December last year thanks to relaxed rescheduling policy of Bangladesh Bank that brought down the sour loan to 9.32% in the sector.
At the end of September last year, the amount of NPLs in the banking system were to the tune of Tk1,16,288.31 crore, or 11.99% of the total disbursed loans, according to the latest Bangladesh Bank (BB) data.
However, NPLs rose by Tk420 crore in 2019 over last year.
Bankers said the large scale loan rescheduling took place in the final quarter of last year that helped reduce the high amount of NPLs in the banking sector.
Last year, NPLs amounting to Tk50,434 crore were rescheduled, up 117.29% from a year earlier, according to BB data.
Banks rescheduled Tk23,210 crore in 2018.
The loan rescheduling increased owing to the relaxed policy offered by the central bank, said M Kamal Hossain, managing director of Southeast Bank.
He said banks got some berthing time to regularize the bad loans under the special rescheduling policy.
Besides the existing loan rescheduling policy, the central bank on May 16 last year issued a special policy on loan rescheduling and one-time exit scheme for defaulters to reduce the high amount of toxic loans.
Under the special policy, defaulters got the opportunity to regularize their loans for 10 years, including one-year grace period just by making 2% down payment. Their interest will be charged at the rate of 9%.
As per a High Court instruction, the central bank had earlier extended the deadline for defaulters several times to have their NPLs rescheduled under the relaxed policy.
“Loan rescheduling is a regular affair across the world, which is not bad for banks. But in our country, we are rescheduling the bad loans to clean the financial statements and reduce the amount of stressed loans artificially. As a result, the NPLs are not decreasing in real terms,” said Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, and former chairman of the Association of Bankers, Bangladesh (ABB).
He said as a short-time measure, loan rescheduling helped banks clean their financial portfolios but, in the long run, it increased the defaulted loans.
Of the total NPLs, six state-owned commercial banks account for 23.85%, or Tk43,994 crore of their total disbursed loans. Their total outstanding loans were Tk1,84,404 crore as of December, last year.
The NPLS of Private Commercial Banks (PCBs) were Tk44,174 crore or 5.78% of the total disbursed loans at the end of last year. Total outstanding loans of PCBs were Tk7, 63,966 crore as of December, the BB data said.
Default loans of foreign banks was Tk2,103 crore or 5.74% of total loans, with their total outstanding loans hitting Tk36,622 crore in December last year.
NPLs of three specialized banks — Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Probashi kallyan Bank — stood at Tk4,058 crore or 15.12% of total outstanding loans at the end of December last year. Their total outstanding loans was Tk26,834 crore.