Bangladesh Bank Governor Fazle Kabir speaks at a regional banking conference organised by the Bangladesh Institute of Bank Management at its auditorium in the capital yesterday. Photo: BIBM

Bangladesh’s bad loan ratio higher than India, Nepal

The high non-performing loan ratio remains a key concern for the banking sector, said a country paper on Bangladesh that was presented at a conference yesterday. Between 2014 and 2018, the NPL ratio has been hovering above the 10-percent mark, according to the paper titled “A Review of the Activities and Performance of the Banking Sector of Bangladesh”.

The NPL ratio would go up to 17 percent if rescheduled or restructured loans are included, it said.  The paper was presented at the Regional Banking Conference organised by the Bangladesh Institute of Bank Management held yesterday at its auditorium in the city.

The state banks are another major concern for policymakers.

Regular capitalisation of the country banks through the government with public money has brought on anxiety, raising the demand for immediately broad-based corrective movements and legal measures, said the paper introduced by using Shah Md Ahsan Habib, professor and director of the BIBM.

Nepal’s NPL ratio is less than 2 percent, in accordance to Mohammed Farashuddin, a former governor of the Bangladesh Bank.

Strong legislation and stringent application of rules have enabled Nepal to hold that ratio, he said.

India has managed to maintain NPL within 7 percentage thanks to strong policies as well, stated Yasin Ali, a supernumerary professor of the BIBM.

India’s central bank discloses the names of wilful defaulters whereas in Bangladesh bankers cannot even dare to send notices to defaulters, he said. Bangladesh saw an big amplify in the quantity of banks in the last decade however the industry’s potential has not increased as much, said Syed Mahbubur Rahman, managing director and chief govt officer of Dhaka Bank.

He blamed the lack of governance for the greater bad loans in the banking sector. “We can not bring the defaulters to the negotiation desk due to the inadequacy of the legal system,” he said, whilst emphasising on improving ability and independence of the regulatory body. Bangladesh’s financial savings price is above 20 percent, but it does no longer prove sound corporate governance, said Faisal Ahmed, chief economist of the BB.

“Weak company governance has tempted the bad borrowers,” he added.

BB Governor Fazle Kabir, who inaugurated the two-day conference, said the banking sector in Bangladesh has grown manifold since independence, accompanied by steady and inclusive growth. The sector has undergone successive rounds of major structural and regulatory reforms, supporting the emergence of a vibrant private sector. “The central bank has steered this transformation by promoting market-based principles and macro-financial stability,” he added.