Non-performing loans (NPLs) in Bangladesh's banking sector surged over Tk 800-billion mark for the first time at the end of September last.
According to the latest statistics from the central bank, the amount of NPLs, officially termed classified loans, rose to Tk 803.07 billion at the end of last September from Tk 657.31 billion a year back.
Thus, the default loans climbed 22.15 per cent up the previous mark on a year-on-year basis.
The Bangladesh Bank data also showed that the volume of default loans in the country's banking sector last declined at the end of December 2016 before a steep climb. In a continuous rise in every quarter since then, the volume scaled a new high at the end of the third quarter (July-September) this year (2017).
Non-performing loans at the end of the third quarter also increased by 29.16 per cent from the amount of Tk 621.72 billion at the end of the final quarter of the last calendar year.
The total non-performing loans accounted for 10.67 per cent of the total outstanding loans from the banking sector worth Tk 7527.30 billion counted at the end of September 2017.
Senior bankers earlier had expressed the fear that the situation might deteriorate in July-September quarter due to poor recovery of loans. They, at that time, also pointed out that flooding in different parts of the country might upset recovery drives.
A senior official of the central bank, however, argued that the rise in non-performing credits was not alarming and it would come down by the yearend.
"Maybe, some seasonal phenomena fuelled the classified loans as it happened earlier years," he said, without elaborating.
Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), termed the rise in default loans as a sign of the weakness of the banking sector.
"Rise in non-performing loans beside slowdown in deposit growth is gradually reducing the loan-able funds of the banks," he said while talking to the FE Tuesday. "This will force the interest rates to shoot up in the near future and we will lose the benefit of the current lower interest rates."
A former economist at the International Monetary Fund (IMF), Dr Ahsan H Mansur also pointed out that if the course of default loan couldn't be reversed or arrested, it would continue to deteriorate.
"Some strong measures are needed to improve the situation and a strong political will is a must to make the steps effective," he added.
Dr Mansur holds the view that only a few banks are doing well with their professional managements and quality boards.
The central bank statistics further show that the total default loans from six state-owned commercial banks stood at Tk 385.17 billion end of September in a rise from Tk 345.81 billion as on June 30 this year, recording an 11.38 per cent rise.
Total non-performing loans from the 40 private commercial banks also increased by 7 per cent to Tk 339.73 billion during the period under review.
The classified loans from nine foreign commercial banks came down to Tk 22.98 billion on September 30 this year from Tk 23.21 billion on June 30, 2017.
The volume of classified loans from two development-finance institutions stayed almost unchanged at Tk 55.18 billion during the period under review.