Staff Reporter :
Future acquisitions of houses or cars will be prohibited for willful loan defaulters, and they are also barred from initiating new business ventures, according to the latest guidelines unveiled by the central bank this Sunday.
Bangladesh Bank aims to limit default loans to below 8 percent of the country’s total outstanding loans by June 2026 to uphold corporate governance in the banking sector.
During a press conference at its headquarters, BB Deputy Governor Abu Farah Md Nasser revealed that the banking watchdog has devised an action plan to foster sustainability in the banking sector. The new roadmap prioritizes strengthening the collection of defaulted loans and refrains from providing concessions to defaulters.
Additionally, it aims to scrutinize the qualifications of shareholders and directors, appoint qualified independent directors, restrict loans within specified limits, and consider mergers of weaker banks with more robust ones.
The central bank introduced this roadmap to fulfill an International Monetary Fund (IMF) condition as part of a $4.7 billion loan package. This move is expected to play a significant role in empowering shareholder directors and managing directors in the recovery of default loans.
The central bank has set a target of reducing nonperforming loans (NPL) for state commercial banks to 10 percent and private banks to below 5 percent within the next two and a half years, as outlined in the action plan presented during the briefing.
As of September 2023, the gross NPL ratio in the banking sector was 9.93 percent, up from 9.36 percent in September 2022, while the default loan ratio was 10.11 percent of the total outstanding loans in June 2023.
The total amount of non-performing loans (NPL) in Bangladesh reached Tk 1,55,397 crore at the end of September 2023. The NPL ratio for state banks was 21.7 percent of their outstanding loans, and for private banks, it stood at 7.04 percent as of September last year, according to central bank data.
Under the new framework, the central bank has eased the loan write-off policy, allowing banks to write off loans within two years instead of the existing three years. This adjustment is anticipated to reduce default loans by 2.76 percent, equivalent to Tk 43,300 crore.”
