Rising NPLs matter of serious concern for banking sector, experts say at ABC

Staff Correspondent | Published: 00:05, Nov 27,2017 | Updated: 23:43, Nov 26,2017


Bangladesh Bank governor Fazle Kabir and Bangladesh Institute of Bank Management director general Toufic Ahmad Choudhury are seen along with others at the inaugural session of the first day of the Annual Banking Conference 2017 held in the city on Sunday. — New Age photo

Rising non-performing loan is a matter of serious concern for the banking sector of Bangladesh, said experts on Sunday.
The NPLs crossed 10 per cent of the total outstanding loans in the country’s banking system in 2016, which was below 9 per cent in the previous year, they said.
Bangladesh Institute of Bank Management director general Toufic Ahmad Choudhury, while reading out a review of the banking activities 2016 at the inaugural session of the first day of the Annual Banking Conference (ABC) 2017, highlighted the concerns over rising NPLs.
The two-day conference is being held at the BIBM in Dhaka where academicians, researchers and bankers from home and abroad are presenting 20 papers on different issues of the banking sector.
On the opening day, banking experts said not only the large loans; even the SME sector also experienced much higher NPLs in 2016.
Toufic said financing a large corporate business by multiple banks was one of the important reasons for default by large borrowers.
Moreover, poor internal governance, inefficiency in fund management and direct lending are also responsible for poor credit quality, he added.
The BIBM review of credit operations of banks in 2016 observed that the public sector experienced only 1.3 per cent against a target of 10.3 per cent growth, whereas the private sector credit growth was 16.8 per cent against a target of 14.8 per cent in 2016.
The highest growth in the large loan category was observed in 2016 but BIBM data showed that the share of large loans in the total outstanding loans of state-owned commercial banks was around 48 per cent in 2016.
Trust Bank additional managing director Faruq Mainuddin Ahmed as a panel discussant at the conference said most of the banks hide the real amount of their defaulted loans.
‘As an insider of the banking sector,’ he said, ‘although only 12 per cent of GDP is shown as defaulted loans, the actual amount is as high as 20 per cent’.
Another panellist Centre for Policy Dialogue research director Khondakar Golam Moazzem said bankers and banking experts are yet to identify the definite causes of the increasing defaulted loans.
The real causes should be identified and it is to be investigated if the board or directors of a bank or its management committee is liable for irregularities in issuing the huge amount of loans, he said.
Bangladesh Bank governor Fazle Kabir inaugurated the conference as chief guest.
He said it is the duty of the central bank to issue rules, regulations and guidelines for the smooth performance of all the banks running business in the country.
Ideas and points from the papers to be presented at the conference will be taken into account for further revising BB’s policies, he said.
BIBM supernumerary professor Md Yasin Ali said the Islamic banks being guided by the principles and rules of Shariah have some inherent limitations in selecting the operational sectors and securitised instruments for financing compared to their conventional counterparts.
The Islamic banks are also not following the banking rules properly, he said.
Emphasising the need for looking into the job security issue at a number of private banks, he said it is high time for the government and the central bank to see if separate guidelines are needed for running the banks following the Shariah principles. 

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