The International Monetary Fund (IMF) has emphasised the necessity of stronger regulations and supervision to address banking sector weaknesses.
“The ratio of non-performing loans (NPLs) to total loans remains high and continues to grow,” it said in a latest report, released on Friday from Washington.
The volume of classified loans in the country’s banking system jumped by more than 19 per cent or Tk 142.86 billion in the first quarter (Q1) of 2018 despite the central bank’s close monitoring.
The amount of NPLs rose to Tk 885.89 billion during the January-March period of this calendar year from Tk 743.03 billion in the preceding quarter, according to the central bank’s latest data.
The share of NPLs also rose to 10.78 per cent of the total outstanding loans in the Q1 of 2018 from 9.31 per cent in the previous quarter.
The classified loans cover substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 8,221.37 billion as on March 31 last.
It was Tk 7,981.96 billion three months ago. Total outstanding loans were Tk 6,970 billion as on March 31, 2017.
The recent amendment of the Banking Companies Act has also raised governance concerns as it increased the number of family members allowed to sit on private bank boards from two to four, the IMF said.
It said the tenure of directors has also been extended from six to nine years.
“Additional banking licenses under consideration could further challenge banking supervision and regulation,” the international lender warned.
The IMF also encouraged the authorities to avoid regulatory forbearance and put in place a robust resolution framework for troubled banks.
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