Banks write off Taka 6,261 crore bad loan in 2014

Banks write off Taka 6,261 crore bad loan in 2014

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Bad or default loans amounting to Tk 62.61 billion were written off by banks in the calendar year 2014.
These loans were written off when they became adversely classified. In CY13, about Tk 62.97 billion was written off.
This was revealed by “Financial Stability Report (FSR) 2014″ released by Bangladesh Bank recently.
According to the FSR, about Tk 390 billion are bad or loss loans that are more than three-fourths or 77.8 percent of total non-performing loans (NPL).“It’s a matter of concern that the bulk of classified loans is in the category of Bad/Loss loans,” said the FSR.
The non-performing loan ration against total loan ratio has increased to 9.7 percent in CY14 from 8.9 percent in CY13.
Commenting on the issue, former deputy governor of Bangladesh Bank Ibrahim Khaled said such move for writing off bad loans or increasing trend of NPL has a major adverse impact on the country’s economy in general and the banking sector in particular.
Explaining the matter, he said when NPL increases it directly affects the profit of the banks for which the banks have to go for provisioning and automatically banks have to raise the interest rates.
“When interest rates get higher, the whole business, particularly the investment, is severely affected and finally the country’s overall economy has to suffer,” he told UNB.
According to Ibrahim Khaled, lack of good governance in the banking sector has been the key reason for increasing the NPL.
He also blamed the bureaucratic interference into the affairs of the central bank for its failure to ensure good governance in the banking sector.
The former deputy governor of the central bank observed that Bangladesh Bank is not being able to regulate the state-owned banks properly due to bad people placed by the government in the boards of state-owned banks who always do bad practices.
Bangladesh Bank said despite the loan write-off the legal procedure against the defaulted borrowers will continue and initiatives will continue by the banks for the recovery of the written-off loans.
The FSR said the ratio of bad loans to total classified loans ratio was 78.7 percent in CY13 which rose from 66.7 percent in CY12, mainly due to the unearthing of some large financial irregularities. A slight improvement in NPL categorisation does not mean any significant improvement. However, most of the banks are maintaining required provisions against bad loans.- UNB

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