Bangladesh Bank on Monday asked scheduled banks to reduce their defaulted loans to 10 per cent of their total outstanding loans by December 31, 2014 from the existing 11.60 per cent even by writing-off bad loans if required. The BB gave the direction at a quarterly bankers’ meeting presided over by its governor Atiur Rahman at the central bank headquarters in the capital.BB deputy governor SK Sur Chowdhury told reporters after the meeting that the central bank had asked managing directors and chief executive officers of the banks to decrease their defaulted loans at any cost by December 31, this year.
The BB asked the banks to write-off the bad loans by following the central bank’s rules and regulations in a bid to decrease their defaulted loans.
A whopping amount of bad loans of Tk 15,667 crore was written off during the last five years which was almost half of such loans erased by the banks from their balance sheets since the system of loan write-off was introduced in 2002.
According to the central bank data, loans of Tk 31,500 crore have so far been written off as of March 2014.
Annual average amount of written-off loans stood at Tk 3,066 crore in the last five years, while it was about Tk 1,583 crore till 2009.
The BB data showed that defaulted loans in the banking sector increased to Tk 57,290.89 crore as of September 30, 2014 from Tk 40,583.01 crore as of December 31, 2013.
At the bankers meeting, Atiur said that the defaulted loans ratio of 11.60 per cent has been a cause of concern for the banking sector.
He asked the banks to take immediate measure to decrease the defaulted loan by December 31, 2014.
The BB asked the banks to discuss with their defaulted clients to recover or declassify the non-performing loans, Sur said.
He said that the central bank had asked the banks not to impose excessive transaction charge on the clients as it had recently received a number allegation from the customers in this connection.
The BB asked the banks to decrease their interest spread rate, the gap between the rate on deposit and loan, in accordance with the central bank directions.
Eastern Bank Ltd managing director Ali Reza Iftekhar told reporters that the state-run banks had particularly held large amount of defaulted loans in the banking sector, but the ratio of the private commercial banks was better than the state-run banks.
The BB governor asked the banks to reduce the defaulted loans to 10 per cent by December, he said.
The BB had assured that it would consider the relaxed rescheduling policy for defaulted loans on case-to-case basis meaning that the BB would relax its rescheduling policy on special consideration, he said.
The BB gave one month time duration to the banks to settle their overdue inland bills otherwise it will cut the overdue amount from the indebted bank’s current account, which are maintained with the central bank, to repay the creditor bank, Iftekhar, also chairman of Association of Bankers, Bangladesh, told reporters.
The managing directors of the banks requested the central bank to extend the time duration by one year more year to preserve the provision shortfall against the losses in the capital market between 2011 and 2012, he said.
The BB earlier asked the banks to make up their provision shortfall by December 2014, but they were yet to keep the provision.
The banks will give cash dividends to their clients if the central bank will extend the time duration, he said.
The BB will take a decision in this regard within the next three or four days, he said.
-With New Age input
