The default loans dropped slightly in September last as the central bank suspended the routine exercise of classification to help businesses overcome the adverse impact of Covid-19 pandemic.
The volume of non-performing loans (NPLs) fell by nearly 2.0 per cent or Tk 16.76 billion to Tk 944.40 billion as on September 30 from Tk 961.17 billion as on June 30 this year, according to the Bangladesh Bank (BB)'s latest statistics.
However, the real picture of the default loans would surface after ending the suspension of loan classification, according to senior bankers.
"We'll know partially the real situation in the first quarter (Q1) of 2021 and fully in June 2021," M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, told the FE.
He said the banks are not allowed to classify loans adversely until December 31, 2020 in line with the BB's directives.
The central bank had extended by three more months the suspension of rigid rules for classification of loans to help the businesses overcome the effect of the pandemic.
The BB has already asked all the scheduled banks not to be harsh while classifying loans until December 31, 2020. The original deadline for the facility expired on September 30.
This was the second extension. The concession that came into effect for the first time on March 19 was made effective until June 30, but was extended by another three months until September 30.
Talking to the FE, BB spokesperson Md Serajul Islam said recovery and rescheduling of loans have helped reducing the amount of NPLs in the third quarter (Q3) compared to the preceding quarter this calendar year.
Mr Islam, also an executive director of the central bank, expected that the amount of classified loans will decrease further in the final quarter of 2020.
The amount of classified loans was Tk 943.31 billion as on December 31, 2019. It was Tk 1,162.88 billion as on September 30, 2019.
The extent of classified loans also came down to 8.88 per cent of the total outstanding loans during the period under review from 9.16 per cent three months ago. It was 9.32 per cent as on December 31, 2019.
The default loans include substandard, doubtful and bad/loss of total outstanding credits, which stood at Tk 10,636.26 billion as on September 30, 2020, from Tk 10,497.24 billion as on June 30 this calendar year. It was Tk 10,118.29 billion as on December 31, 2019.
Echoing the BB's official, Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB), said the amount of NPLs may fall further in the final quarter of the year as banks will expedite their recovery drives.
Mr Rahman, also MD and CEO of Mutual Trust Bank Limited, said the loans written off along with restructuring have also pushed down the volume of NPLs during the period under review.