We have to closely monitor the banks that have taken the opportunity of loan rescheduling, so those loans won’t turn into classified again

Bangladesh Bank Governor Dr. Atiur Rahman yesterday hoped that the non-performing loans (NPL) of the scheduled banks would remain under a moderate level in the balance-sheet of December 2013 just because of flexible policy undertaken by the central bank.

He was addressing the General Managers Conference held at the central bank headquarters.

To recover the financial health of the banks, International Monetary Fund (IMF) has long been putting pressure on the central bank to reduce the NPL.

Addressing the conference BB governor said, “We have to closely monitor the banks that have taken the opportunity of loan rescheduling, so those loans won’t turn into classified again.” 

“As the rate of classified loans in the banking sector increased slightly 12.79% in September, 2013 after adopting internationally best practices in loan classifying and provisioning, the central bank has relaxed the rules of loan-rescheduling, so the NPL rate reduces in the balance sheet.’’

Bangladesh Bank had earlier asked the commercial banks issuing a circular in December, 2013, to offer privileges to small and medium enterprises (SMEs), agricultures and other productive sectors in case of loan rescheduling.

It also asked the banks and financial institutions to consider the impact of political unrest on various productive sectors and business to receive down payment and allow loan rescheduling.

The banks and financial institutions should, however, need to obtain permission from their respective authorities and no objection from the BB before allowing anyone the extended-time for the loan rescheduling.

Although the BB circular is applicable to the affected businessmen only, on the contrary, the central bank is also allegedly allowing all the non-compliance rescheduling cases. As a result, many businessmen are taking the chance to reschedule their loans despite not being affected.

Country’s commercial banks started loan rescheduling comprehensively in order to reduce the non-performing loan (NPL) amount in the balance sheet of the year end 2013.

Bangladesh Bank has so far approved over 300 such loan rescheduling cases which don’t comply with the loan rescheduling requirements.  Among the loan-rescheduling recipients, Beximco Group got the highest privileges with around Tk2,000 crore, according to the Bangladesh Bank data.

Exchange rate remained stable in the interbank call money market and in foreign money market due to the close monitoring by the central bank, said the governor at the conference.

“However, inflation remained higher in last three-month because of supply disruption amid political unrest.”