Despite intense efforts to reduce Non-Performing Loans (NPLs), it increased further by more than Tk 1,000 crore in the second quarter of the current year.
The total value of NPLs stood at Tk 1,12,000 crore in June, up from Tk 1,10,873 crore in March, according to the latest data from Bangladesh Bank.
Even though the rate of rise of NPL declined slightly, it still remains in double digits.
The NPL rate stood at 11.69 percent in June, down from 11.87 percent in March, according to central bank data.
On 10 January, Finance Minister AHM Mustafa Kamal declared that NPLs would not increase starting that day because the Bangladesh Association of Banks (BAB) was going to take necessary measures to check the loans.
His announcement did not materialize as NPLs increased by Tk 17,000 crore from December last year to March this year.
On the instructions of the finance ministry, the Bangladesh Bank then issued a relaxed loan rescheduling package to bring down NPLs. This allowed defaulters to regularize loans over 10 years at two percent down payment.
This facility still did not help banks reduce NPLs because clients who were paying regularly became irregular to take advantage of the new rescheduling policy, said a senior executive of a private bank.
Most of the regular clients became willful defaulters after the central bank announced the rescheduling package in May, he said.
“Despite rescheduling loan for several times, many clients could not continue their installment payment and become defaulters yet again. Moreover, the Bangladesh Bank has instructed banks to keep a provision against rescheduling and this has discouraged banks from rescheduling loans,” said Sayed Mahbubur Rahman, managing director of Dhaka Bank.
At present, even though clients are applying to reschedule their loans under the new policy, banks are refusing them on grounds that if most loans get stuck for many years, it will create a liquidity crisis in the banking system, accodring to central bank sources.
Thousands of complaints have piled up at Bangladesh Bank from clients who have not been given the rescheduling facility from their respective banks under the new package, said a senior executive of the central bank.