BB Report: Growing NPLs in manufacturing sector raise concerns

Staff Reporter :
The manufacturing sector continues to grapple with a significant concentration of nonperforming loans (NPLs) compared to other sectors, according to a report by the Bangladesh Bank.

The report reveals that the NPL share in the manufacturing sector stands notably high at 55.10 percent, surpassing all other sectors. Additionally, this sector claims a substantial portion of the banking industry’s loans, accounting for 49.27 per cent, as indicated in the BB’s Financial Stability Report 2022, released on Sunday.

The report highlights that the gross NPL ratio of 9.13 per cent within the manufacturing sector exceeds the industry average of 8.16 per cent.

“As loans in the manufacturing sector occupied almost half of the banking sector’s loans and advances, this sector seems to pose a pocket of risk for the banking sector,” reads the report.

Furthermore, the ship-building and ship-breaking sub-sector exhibit a worrisome trend, with a high gross NPL ratio of 22.43 per cent in 2022, up from 18.75 per cent in the previous year.

BB’s Financial Stability Report 2022 further states that the overall asset quality of the banking sector has experienced a slight deterioration.

The report notes that the rise in gross NPLs, driven primarily by increased
NPL ratios within state-owned commercial and specialised banks, has contributed to this marginal decline in asset quality.

Meanwhile, country’s banking sector has the second-highest ratio of non-performing loans (NPL) among the countries in South Asia as lenders continue to face multiple challenges emanating from scams, a lack of corporate governance and borrowers’ growing reluctance to make installments regularly.

Meanwhile,the NPLs stood at Tk 1,31,620 crore or 8.80 per cent of the total disbursed loans in March this year which was Tk 120, 656 crore in December last year, as per the central bank’s data.