BB discloses Tk 377,922cr as risky loans last year on IMF demand
The banking sector’s total risky loans amounted to Tk 377,922 crore at the end of last year, in a development that makes for a sobering reading of the actual health of this vital sector of the economy.
The amount was arrived at by calculating the total non-performing loans (NPL), outstanding rescheduled loans and outstanding restructured written-off loans, all of which were disclosed in the latest edition of the Bangladesh Bank’s Financial Stability Report.
At the end of 2022, the banking sector’s NPL stood at Tk 120,649 crore, outstanding rescheduled loans Tk 212,780 crore and outstanding written-off loans Tk 44,493 crore.
It shows the banking sector is heading towards an untenable situation.
The breakdown of distressed assets comes as part of the conditions agreed with the International Monetary Fund for the $4.7 billion loan.
The central bank used to report the sector’s distressed assets in its annual financial stability report that comes out every June, and the IMF has stipulated that the practice is restarted.
The Covid-19 financial support policies are set to expire in December 2022.
As the unwinding of these policies may lead to a gradual realisation in the losses in the banking system, asset classifications, in particular restructured loans, should accurately reflect current balance sheet risks and distressed assets be adequately provisioned.
Besides, as per international best practices, distressed assets are reported alongside NPLs to reflect the true state of the banking sector’s stressed assets.
Ensuring the proper monitoring of regular and rescheduled/restructured loans and the pace of recovery of NPLs may improve the asset quality of the banking industry.
Nonetheless, external issues like prolongation of the Russia-Ukraine conflict and other geopolitical issues may result in slow business as well as impaired debt-servicing capacity of the borrowers, which might ultimately deteriorate the asset quality of the overall banking sector in Bangladesh.
In 2022, loans amounting to Tk 63,720 crore were rescheduled, up from Tk 26,810 crore the previous year.
There is no easy way out of this situation — it will be a painful process.
How will the government capitalise such a sum?
