In the shadows of recent financial problems the classified-loan buildups in Bangladesh's banking system leapt over 16 per cent or Tk 145.40 billion in the last calendar year.
Such slide takes place despite providing policy support by the central bank-by way of rescheduling repayment of the non-performing loans, write-off process and so.
The volume of non-performing loans or NPLs rose to Tk 1032.74 billion, as of December 31 in the past year, from Tk 887.34 billion a year before, according to the central bank's latest statistics, released Wednesday.
And the amount of classified loans will go ballooning further if the amount of write-offs is included in the figure.
The outstanding amount of written-off credits came to Tk 436.09 billion on September last year.
The Bangladesh Bank (BB) introduced guidelines for writing off classified loans in 2003, aiming to improve loan recovery and make the financial statements of banks more transparent and accountable.
Writing off loans is a global practice. But it will depend on the capability of a bank concerned to write off its dud loans.
Before making any final decision in this regard, the bank management has to ensure cent-percent provisioning against the amount to be written off.
Talking to the FE, Md Serajul Islam, the central bank's spokesperson, said the amount of classified loans increased slightly in the fourth quarter (Q4) of 2021 compared to the preceding quarter following higher volume of total outstanding loans in the banking sector.
"But the NPLs have decreased in term of percentage during the period under review," Mr Islam, also a BB executive director, says while explaining the latest trend of classified loans.
The volume of classified loans increased over 2.0 per cent or Tk 21.23 billion to Tk 1032.74 billion as on December 31 from Tk 1011.50 billion three months before, the BB data show.
On the other hand, the share of NPLs came down to 7.93 per cent of the total outstanding loans during the period under review from 7.66 per cent as on December 2020. It was 8.12 per cent as on September 30, 2021.
The classified loans cover substandard, doubtful and bad/loss portions of the total outstanding credits, which reached Tk 13017.97 billion as on December 31 on a consolidated basis. It was Tk 11587.75 billion a year ago.
The total outstanding loan was Tk 12453.91 billion as on September 30, 2021. The central bank has prepared the consolidated statement covering both domestic banking units (DBU) and offshore banking units (OBU) since the final quarter of 2020.
Earlier, the BB prepared two statements of classified loans separately for DBU and OBU.
Senior bankers, however, say a good number of borrowers availed the eased repayment facility during the period in line with the BB policy relaxation on loan repayments.
Under the relaxed stance, the borrowers were allowed to avail a fresh chance to remain unclassified if they repay minimum 15 per cent of the total outstanding amount of loans for the whole calendar year by December 31, 2021.
The remaining 85 per cent of the outstanding credits during the period from January to December 31last calendar year would be payable within one year from the date of expiry of the loan tenure, according to officials.
The BB officials also say recovery as well as rescheduling of loans has also helped keep the amount of NPLs at a 'reasonable level' at the final quarter of 2021.
Experts and bankers, however, fear that the volume of NPLs may go up further in the first quarter (Q1) of the current calendar year as the BB's policy relaxation on loan repayments has already been phased out.
"The amount of NPLs is likely to go up further in the Q1 of 2022 because of withdrawal policy support of the BB," Syed Mahbubur Rahman, managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, told the FE while explaining the possible trend of NPLs.
Echoing Mr Rahman;s view, Shah Md. Ahsan Habib, professor at Bangladesh Institute of Bank Management (BIBM), says the volume of classified loans may increase in the Q1 of 2022 that would not be an abnormal trend of NPLs in the country's banking system.
"We're still in recovery process from the Covoid-19 business distraction," Mr Habib notes.
He also says the banks will have to enhance their capital bases to handle potential fall of asset quality, if any.
Meanwhile, the total amount of default loans with the six state-owned commercial banks (SoCBs) rose to Tk 449.77 billion in the Q4 of 2021 from Tk 422.73 billion a year before. The amount was Tk 440.16 billion in the Q3 of 2021.
On the other hand, the total amount of NPLs with the 42 private commercial banks reached Tk 515.21 billion as on December 31 last, from Tk 403.61 billion on the same day of 2020. It was Tk 507.43 billion in the Q3 of 2021.
The classified loans of nine foreign commercial banks (FCBs) rose to Tk 27.85 billion in the Q4 of 2021 from Tk 20.38 billion a year ago. It was Tk 26.92 billion as on September 30 last year.
Such loans with the two development-finance institutions (DFIs) dropped to Tk 39.91 billion as on December 31 last from Tk 40.61 billion a year ago. It was Tk 36.99 billion in the Q3 of 2021.
