Bangladesh should estimate NPLs using international standards: IMF
Immediate focus on NPL estimation and a reduction strategy is crucial to restoring financial stability, IMF Mission Chief for Bangladesh Chris Papageorgiou says
Bangladesh's financial sector must prioritise accurate estimation of non-performing loans (NPLs), using international standards, and create a comprehensive plan to mitigate these vulnerabilities, the International Monetary Fund has said.
Speaking to the state-run news agency following their 24-30 September Dhaka visit, IMF Mission Chief for Bangladesh Chris Papageorgiou highlighted that NPLs, which are loans that remain unpaid, pose a significant threat to the stability of the country's financial system by limiting funds for new loans.
"Immediate focus on NPL estimation and a reduction strategy is crucial to restoring financial stability," he said.
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Papageorgiou pointed to other critical reforms such as conducting an asset quality review and implementing international best practices for banking recovery as essential steps to prevent financial instability.
"Furthermore, implementing risk-based supervision, enhancing corporate governance, accelerating reforms to the regulatory framework, and enhancing the independence of the Bangladesh Bank should bolster the institutional and regulatory environment for lasting financial stability," he added.
He further noted that the IMF, in collaboration with other development partners – the World Bank, Asian Development Bank (ADB), USAID, and the UK's FCDO – is assisting the task force formed by Bangladesh Bank to address vulnerabilities in the financial sector.
"The IMF, which has been a steadfast partner of Bangladesh for more than 50 years, provides financing assistance, policy advice, and capacity development," Papageorgiou said.
He also laid emphasis on developing the domestic capital market to mobilise long-term financing to support growth.
The central bank has formed a task force for banking sector reform, with six experts on the financial sector as members of the taskforce. Governor Ahsan H Mansur is serving as the coordinator of the taskforce.
Apart from taking different measures to reform the banking sector, the taskforce will also publish a white paper.
