In any country, a safe and sound banking system is the sine qua non of a strong economy.
By channelising funds from savers to borrowers, banks help keep the wheels of the economy moving, in the way boosting the confidence of businesses, investors and consumers.
Any loan that remains overdue for over three months is termed as a stressed asset in the banking sector.
And today, this huge pileup of bad loans threatens to derail the economic revival in Bangladesh by choking the credit supply channel of the economy, as against export earnings and the resilience of the private sector in fuelling growth amid Covid.
In fact, the cumulative non-performing loans (NPL) of six state-owned commercial banks (SCBs) currently stand at Tk 43,836 crore against that of the combined figure of Tk 49,191 crore of 42 private commercial banks (PCBs).
For years, Bangladesh Bank (BB) -- the central bank -- has been underscoring the need for state-owned banks to strengthen the recovery of loans lying unrealised by defaulters, many wilful.
At the same time, banks have been advised to take necessary steps in meeting the capital deficit and creating a professional asset liability management ecosystem.
Implementation of a slew of stimulus packages has caused an increase in the outstanding loans in the country's banking system during the first half (H1) of the year, he said.
The amount of outstanding loans rose by more than 3% to Tk 12,13,164 billion as of June 30, 2021, from Tk 11776.59 billion quarter on quarter, as per BB data in UNB's possession.
Janata Bank Managing Director Md Abdus Salam Azad admitted the growing stressed assets problem in the economy.
“We have already taken some steps as per the central bank’s guideline to increase the recovery of NPL, and we are working towards reducing the bad loans of Janata Bank,” he said.
However, he claimed that the state-owned banks have been doing well in sectors like remittance, agriculture loan disbursement and recovery, implementation of stimulus loan disbursement other than loan recovery from large industries.
"The state banks work with some limitations which also affect loan recovery from the top defaulters," he said.
But the recovery of NPL of four large state-owned banks is not satisfactory, if figures are to go by. In the first six months of this year, Sonali Bank set a target of collecting Tk 350 crore from the top 20 defaulters, but only Tk 10 crore was recovered. During the period, Janata Bank collected Tk 7 crore against the target of Tk 800 crore, Agrani recovered Tk 36 crore against the target of Tk 240 crore and Rupali collected only Tk 38 lakh against the target of Tk 220 crore.
The NPL of state-owned specialised banks also increased from Tk 2,038 crore to Tk 2,456 crore in H1 of the year.
Although gross NPL ratio in the banking sector moderated to 8.18% at the end of Q4FY21 from that of 9.16% at the end of Q4FY20, it increased marginally from that of 8.07 percent at the end of Q3FY21 partly due to the lifting of the loan moratorium facility and slackness of economic activities owing to the nationwide lockdown.
The gross NPL ratio was recorded at 8.61 percent at the end of Q4FY21 from that of 8.48 percent at the end of Q3FY21. The gross NPL ratio of PCBs went down to 5.44 percent at the end of Q4FY21 from 5.63 percent in Q4FY20, although it increased from that of 5.13 percent at the end of Q3FY21.
On the other hand, the gross NPL ratio of SCBs and FCBs moderated to 20.62 percent and 3.91 percent at the end of Q4FY21 from 20.91 percent and 4.13 percent, respectively, at the end of Q3FY21.