Banks’ classified loans rise alarmingly

Banks’ non-performing loans (NPL), also known as classified credits, have increased alarmingly, which implies low base of assets, capital and income of the banks, according to Bangladesh Bank (BB) sources.

Statistics released by the central bank Thursday showed that non-performing loans both in state-run and private banks stood at 10.03 percent of the total outstanding loans of the banks at end of the year 2012.

The amount of classified loans stood at 6.12 percent of bank’s total outstanding loans in December 2011.

Total classified loans of banks stood at Tk 427.25 billion at the end of 2012, up from Tk 226.44 billion during the same period a year ago.

Out of total classified loans, the share of four state-owned banks is Tk 215.15 billion for 2012.

“The increase in NPL is alarming for the banking sector. It implies low base of capital adequacy, weakened banks’ asset and lessen profitability of banks,” a BB official said Saturday.

BB data shows that the recovery of industrial terms loans in the first quarter of the current financial year (FY) was Tk 81.91 billion.

During July-January period of this fiscal, the recovery of farm loans stood at Tk 79.52 billion.

A high official of a private bank, however, claimed that the increase in classified loans was because of the tightened rules enforced by the central bank effective from October 2012.

“The BB has curtailed timeline for rescheduling and provisioning loans which resulted in broadening the amount of non-performing loans,” said the official, seeking anonymity.

A BB official, while replaying to this comment, said the central bank had to go for enforcement of the tightening rules to comply with international standards.

News Source:
Daily Sun Bangladesh

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