Loan classification must meet global standards to restore trust: Top bankers
At a roundtable organised by The Business Standard in Dhaka yesterday, they warned that the banking sector is in crisis due to soaring loan defaults, a liquidity shortage, and sluggish credit growth, which has fallen to 7.28%.
Managing directors and chairmen of the country's banks have stressed the need to align loan classification with international standards, even if it increases reported defaults. Many concealed defaults must be exposed for transparency.
At a roundtable organised by The Business Standard in Dhaka yesterday, they warned that the banking sector is in crisis due to soaring loan defaults, a liquidity shortage, and sluggish credit growth, which has fallen to 7.28%.
High bank interest rates and rising utility costs have further increased pressure on borrowers, deepening the investment crisis, they added.
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Many banks are struggling with capital and provision shortfalls. Instead of granting forbearances, the Bangladesh Bank should establish a clear recovery roadmap, said the top bankers.
Customers have a right to know about banks' financial health as transparency is key to restoring confidence among stakeholders and correspondent banks.
They stressed that without political will, no meaningful reform will take place. Many borrowers responsible for destabilising the banking sector expect to return through elections and continue their harmful practices. Some are clearing their Credit Information Bureau records just before elections, only to default again afterward.
With non-performing loans exceeding 20%, banks face difficulties in securing credit lines from foreign institutions. To address the crisis, the Bangladesh Bank must strengthen asset management companies to recover distressed assets and set clear directives for capital restructuring in struggling banks.
