The amount of classified loans in the banking sector increased slightly in the first quarter (Q1) of the current calendar year despite providing policy support by the central bank in relation to loan classification.
The volume of non-performing loans (NPLs) grew by more than 7.0 per cent or Tk 63.51 billion to Tk 950.85 billion during the January-March period of 2021 from Tk 887.34 billion in the preceding quarter, according the Bangladesh Bank (BB) latest statistics.
The share of NPLs also rose to 8.07 per cent of the total outstanding loans in the Q1 of 2021 from 7.66 per cent in the previous quarter - as per consolidated statement of classified loans covering both domestic and offshore banking units. It was 9.03 per cent as on March 31, 2020.
The central bank has started preparing the statement since the final quarter of the last calendar year.
Earlier, the BB prepared two statements of classified loans separately for domestic banking units and offshore banking units.
The amount of classified loans increased by nearly 3.0 per cent or Tk 25.74 billion to Tk 950.85 billion in the Q1 of 2021 compared to the same period of the previous calendar year. The amount of NPLs was Tk 925.11 billion as on March 31, 2020.
The classified loans cover substandard, doubtful and bad/loss portions of the total outstanding credit, which reached Tk 11,776.58 billion as on March 31 on a consolidated basis. It was Tk 11,587.75 billion three months before.
Talking to the FE, Md Serajul Islam, the central bank spokesperson, said the amount of classified loans would decrease in the second quarter (Q2) of this year, if the banks strengthen their recovery drives.
Mr Islam, also a BB executive director, advised the banks to disburse fresh loans complying with the central bank's rules and regulations properly to avert their risks.
"Some borrowers could not repay their loan installments properly during the period under review - mainly due to the ongoing Covid-19 pandemic," another BB official told the FE while replying to a query.
Senior bankers, however, said most of the borrowers enjoyed an easy repayment facility during the period following the BB's policy relaxation on loan repayments. Under the BB's policy relaxation, the borrowers are allowed to get three more months' time to repay their due loan installments on the basis of banker-customer relationship because of the second wave of the Covid-19 pandemic.
The borrowers are allowed to clear their installments on continuous, demand and term loans by June 2021, instead of March 2021, on the basis of banker-customer relationship, according to a notification issued by the central bank on March 24, 2021.
Besides, the BB offered a deferral loan classification facility from January 2020 to December 2020, considering the adverse impact of the Covid-19 pandemic on people and businesses.
"The volume of NPLs traditionally increases in the first quarter of each calendar year," Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB), said while explaining the trend of classified loans in Bangladesh.
Mr Rahman, also managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, said: "We've applied the BB's latest policy relaxation on loan repayments, considering the cash flow of borrowers."
The volume of defaulted loans with six state-owned commercial banks rose to Tk 434.50 billion in the Q1 of 2021 from Tk 422.73 billion three months before.
On the other hand, the amount of NPLs with 42 private commercial banks reached Tk 450.90 billion during the January-March period of this year from Tk 403.61 billion in the Q4 of 2020.
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