NPLs likely to exceed 30% of total outstanding loans by June: Cenbank
As per the latest available data from the central bank, NPLs stood at Tk2.84 lakh crore in September 2024, accounting for nearly 17% of the country's outstanding loans of nearly Tk16.83 lakh crore
Non-performing loans (NPLs) in Bangladesh's banking sector are expected to exceed 30% of the total outstanding loans by June this year, according to the monetary policy statement released by the Bangladesh Bank today (10 February).
As per the latest available data from the central bank, NPLs stood at Tk2.84 lakh crore in September 2024, accounting for nearly 17% of the country's outstanding loans of nearly Tk16.83 lakh crore.
"The surge in NPLs is likely to exceed 30% of total outstanding loans, raising serious concerns for the banking industry," the central bank said in the monetary policy report.
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Factors likely to contribute to the increase of NPLs include systemic weaknesses, regulatory gaps, and exploitative practices such as money laundering and illicit capital flight, the report adds.
"It is important to note that several banks are currently facing a significant liquidity crisis, which has been worsened by rising NPLs, slow deposit growth, and weak loan recovery.
"To help stabilise their liquidity situations, BB is allowing the struggling banks to borrow from the inter-bank market under central bank guarantees," it also says.
The increasing demand for funds has led the Bangladesh Bank to provide temporary liquidity support to some of these banks, while measures have been taken to absorb excess liquidity from the banking system through the issuance of BB bills to avoid long-term financial imbalances.
In response, BB has introduced comprehensive guidelines aligned with international best practices for loan classification, provisioning, and recovery.
The central bank said it is committed to enforcing strict regulations consistent with international best practices to improve governance.
Strengthening regulatory oversight and effectively implementing these reforms will be crucial for restoring stability, resilience, and public trust in the country's banking sector, it added.
The central bank is using internationally recognised methods to control NPLs.
It is also planning to incorporate the Expected Credit Loss Methodology in 2027.
