The volume of classified loans in the country's banking sector rose further to hit an all-time high at Tk 1.16 trillion (1.16 lakh crore) at the end of the third quarter of current calendar year despite close monitoring of the central bank.
The volume of non-performing loans (NPLs) jumped by nearly 24 per cent or Tk 223.77 billion to Tk 1,162.88 billion as of September 30 last, from Tk 939.11 billion on December 31, 2018, suggest the latest Bangladesh Bank(BB) statistics.
The amount of classified loans was Tk 993.71 billion a year ago.
"The amount of NPLs increased in the third quarter ending in September last as the regulator encouraged the practice of loan default through relaxation of its policies," Khondkar Ibrahim Khaled, former deputy governor of the BB, told the FE on phone while explaining the rising trend of classified loans.
Mentioning the global practices, the senior banker said the volume of default loans would decline in the event of punishment meted out to the defaulters.
He also said the BB's existing policy support for loan defaulters might have encouraged some of the good borrowers to turn defaulters and avail such facilities.
On May 16 last the central bank offered the special facility to the loan defaulters-rescheduling their loans by making a down payment of 2.0 per cent for a maximum of 10 years.
However, the amount of NPLs increased by more than 3.0 per cent or Tk 38.63 billion to Tk 1,162.88 billion in the third quarter (Q3) of the current calendar year from Tk 1,124.25 billion in the preceding quarter (Q2), the BB data showed.
Talking to the FE, BB spokesperson Md. Serajul Islam said the amount of NPLs increased slightly in the Q3 compared with the preceding quarter in the current calendar year, because the central bank's instruction on policy support for loan defaulters and their one-time exit was yet to be fully implemented.
Mr. Islam, also an executive director of the central bank, expected that the amount of classified loans would decrease in the final quarter of the year following full execution of the notification.
Echoing, M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, said: "Definitely, the amount of NPLs will be reduced by the end of this calendar year."
He also said some borrowers already seized the BB's policy support for loan rescheduling and one-time exit.
The share of classified loans also rose to 11.99 per cent of the total outstanding loans in September from 10.30 per cent nine months ago. It was 11.69 per cent on June 30, 2019.
The default loans include substandard, doubtful and bad/loss portions of the total outstanding credit, which stood at Tk 9,698.82 billion as of September 30, 2019, up from Tk 9,114.30 billion as of December 31, 2018. On September 2018 the figure was Tk 8686.08 billion.
"Large-scale rescheduling of loans is yet to take place mainly due to legal complexity," Syed Mahbubur Rahman, Chairman of Association of Bankers, Bangladesh (ABB), told the FE while replying to a query about the impact of the BB's latest policy support for loan defaulters.
The senior banker expected that such policy support would be implemented properly in the final quarter of the current calendar year.
"The volume of NPLs will decline in Q4 of this calendar year following strengthening of overall recovery drives along with the policy supports offered by the BB," he noted.
In September the total amount of NPLs with six state-owned commercial banks (SoCBs) rose to Tk 549.22 billion, from Tk 486.96 billion on December 31, 2018. It was Tk 537.45 billion as of June 30 last.
On the other hand, the total amount of classified loans with 40 private commercial banks (PCBs) rose to Tk 545.74 billion in Q3, from Tk 381.40 billion in the final quarter of the last calendar year. It was Tk 519.24 billion as of June 30 last.
The NPLs of nine foreign commercial banks (FCBs) came down to Tk 20.91 billion in the July-September quarter last from Tk 22.88 billion in Q4 of 2018. It was Tk 20.58 billion in Q2 of the current calendar year.
The classified loans with two specialised banks (SBs), increased to Tk 55.00 billion in September last, from Tk 47.88 billion nine months ago. It was Tk 46.99 billion as of June 30 of the current calendar year.