Janata, Agrani lag far behind in recovering NPLs among state banks

State-owned Janata and Agrani banks lagged far behind in recovering non-performing loans (NPLs) among the country's four state-owned banks in 2023, according to a report of Bangladesh Bank.

Janata Bank had a target for recovering NPLs at Tk1,515 crore, but could recover only Tk225 crore or 14.85% of the goal. Agrani Bank recovered Tk389 crore or 25.34% of the target set at Tk1,535 crore.

Sonali Bank's target for recovering loans from defaulter customers in 2023 was Tk1,000 crore. The bank was able to recover Tk567 crore, or 56.70% of the target.

On the other hand, the target for recovering loans from defaulter customers of Rupali Bank was Tk920 crore. But it was able to recover Tk507 crore or 55.11% of the goal.

A senior official of the central bank's department concerned said that the state banks have an annual MoU with the central bank on the recovery of non-performing loans and write-off loans. The central bank always keeps the banks under observation in the recovery of these loans, he said.

"On the other hand, the boards of directors of the banks are now very strict in recovering loans from defaulter customers. This is why the recovery of non-performing loans has increased," the officials said.

Mohammad Jahangir, managing director and CEO of Rupali Bank, told TBS, "After joining Rupali Bank as MD, I formed a special cell to recover non-performing loans. At the same time, we are holding meetings with the members of this cell every month. Our special monitoring has increased the recovery from NPLs."

He further said, "I am personally contacting the top defaulters. I have been able to convince many customers that they have to repay their loans, anyway."

Afzal Karim, managing director and CEO of Sonali Bank, told TBS, "A four-tier system is being implemented from the branch to the head office to recover non-performing loans. The manager of each branch has been instructed to play a dual role in recovering the loans of the top 20 defaulter customers in each branch. Additionally, each DMD has been given the responsibility of a department. As a result, we are getting good results in recovering NPLs."

He further said, "Our loan growth is also much better. We are now emphasising the most on ensuring good governance in our bank. We have been able to bring down non-performing loans from around 17% to below 13%."

Mentioning that the central bank has created a roadmap to reduce non-performing loans, the Sonali Bank MD said, "We aim to bring down our non-performing loans to 10% by 2026."

Total NPLs stand at Tk1.45 lakh crore

According to Bangladesh Bank data, the total non-performing loans (NPLs) in the banking sector stood at Tk1.45 lakh crore or 9% of total loans at the end of December 2023.

The total non-performing loans of the six state-owned banks stood at Tk65,000 crore, which was 21% of their total loans.

Sonali Bank has the highest non-performing loan ratio among the four state-owned banks in Bangladesh. As of December 2023, its non-performing loans stood at Tk18,000 crore, which was 26% of its total loan portfolio. Janata Bank follows closely with NPLs of Tk17,500 crore, representing 19.20% of its total loans. Meanwhile, Rupali and Sonali banks have non-performing loans of Tk7,800 crore and Tk13,100 crore, respectively, which constituted 17.81% and 14.13% of their respective loan portfolios.

The central bank has taken various measures to ensure overall monitoring of banks. A risk-based supervision system has been planned to reduce fraud and deception in banks.

The central bank report shows Janata and Rupali banks were ahead in recovering loans from write-off loans in 2023. The two banks recovered 23.64% and 21.67% of their targets respectively. However, the performance of Sonali and Agrani in such recovery was 12% and 14%, respectively.

An official of Janata Bank told TBS, "Usually, there is very little guarantee of recovery from written-off loans. However, we have been able to recover a significant amount."

Banks can usually write off non-performing loans. However, they have to make 100% provisioning for this. In other words, if they have to write off Tk100, they have to make Tk100 provisioning.

The central bank has set a target of taking 17 steps in the roadmap to reduce non-performing loans (to below 8% by 2026. One of these steps is to reduce the write-off period from 3 years to 2 years. This means that non-performing loans can now be written off in two years. If the banks can take advantage of this opportunity, their NPLs will reduce by about Tk43,000 crore.