Listed banks witnessed a 25.13-per cent or Tk 390.83 crore rise in provision for defaulted loans in the January-March quarter of this year compared with that in the same period last year.
According to the published quarterly reports, the 30 listed banks kept Tk 1,946.26 crore in provision for defaulted loans in the first quarter of this year against Tk 1,555.43 crore in the same period last year.
Officials of the banks said that an increase in the amount of defaulted loans was the main reason for the rise in provision amount.
They said the amount of defaulted loans in the country’s banking sector increased in the period as many borrowers refrained from paying instalments.
A government’s move to issue bailout package for the loan defaulters with just 2 per cent down payment was the main reason for the non-payment of instalments, they added.
On May 16, Bangladesh Bank issued a circular stating that the defaulters would get 10 years to repay loans with 2 years of grace period at 9 per cent interest.
Association of Bankers, Bangladesh chairman Syed Mahbubur Rahman earlier 1 told New Age that borrowers did not pay instalments as they waited for the government move.
Besides, the government’s sympathetic approach towards the loan defaulters was another reason for the growing volume of defaulted loans as well as provision requirement for the banks.
The amount of defaulted loans in the country’s banking system rose to Tk 1,10,873.54 crore at the end of March this year from Tk 93,911.4 crore three months ago.
Of the listed banks, Islami Bank Bangladesh kept the highest (Tk 302.96 crore) provision against defaulted loans in the first quarter this year. The Q1 figure was Tk 222.7 crore in last year.
Dutch-Bangla Bank maintained Tk 136.76 crore in provision in Q1, up 349.57 per cent or Tk 106.34 crore on Tk 30.42 crore in January-March last year.
Pubali Bank’s provision for non-performing loans increased by 66.67 per cent or Tk 44 crore to Tk 110 crore from Tk 66 crore.
Southeast Bank’s provision for defaulted loans increased to Tk 109.62 crore from Tk 101.51 crore.
Al-Arafah Islami Bank kept Tk 90.61 crore in provision, Mercantile Bank Tk 84.9 crore, NCC Bank Tk 83.5 crore, Dhaka Bank Tk 81.81 crore, Bank Asia Tk 76.43 crore, Trust Bank Tk 70 crore, BRAC Bank Tk 63.89 crore, One Bank Tk 61.33 crore, City Bank Tk 58.39 crore, Social Islami Bank Tk 52.44 crore, Mutual Trust Bank Tk 51.9 crore and Eastern Bank Tk 50.41 crore.
Shahjalal Islami Bank maintained Tk 48.65 crore in provision, IFIC Bank Tk 48.55 crore, First Security Islami Bank Tk 45.83 crore, Prime Bank Tk 45.72 crore, Premier Bank Tk 42 crore, NBL Tk 35 crore, Standard Bank Tk 34.77 crore, AB Bank Tk 34.53 crore, Jamuna Bank Tk 33.99 crore, Uttara Bank Tk 26.62 crore, UCB Tk 25.5 crore, Rupali Bank Tk 21.08 crore, EXIM Bank Tk 16.77 crore and ICB Islami Bank Tk 2.3 crore in provision for NPLs.
Banks have to keep provision for defaulted loans for safety of the depositors, Bangladesh Bank officials said.
Banks’ profits drop due to NPLs as the amounts kept aside as provision for such loans are deducted from their operating profits, they said.
As per the central bank regulations, banks have to keep 20 per cent provision for substandard loans for next three months.
The provision requirement increases to 50 per cent if any loan turns doubtful and the requirement rises to 100 per cent if any loan becomes bad.
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