Md. Joynal Abedin Khan: Banks are facing extensive pressure originating from an ever-bulging defaulted loans in the last years as the regulatory support in this particular area is due to expire, bankers and experts said.
However, they advised the banks to assess upfront the risk appetite for both customers and banking sectors.
Such an assessment will help better adjust risks that might be created after the end of Bangladesh Bank’s policy support intended to help businesses overcome the adverse effects of the Covid-19 pandemic, they noted, saying the current fiscal year 2021-22 will be more challenging years for the banks.
The problem was raised due to directives of the central bank for the banks to keep provisions against their loans for minimising the possible shocks.
A BB official said the possibility of extending the central bank’s policy support will depend on the severity of the second wave of the Covid-19 pandemic.
The BB has to make such an assessment to address lots of challenges from the first quarter of 2021, he said.
The bankers, however, said the real picture of the defaulted loans would become clear after the end of suspending loan classification. The banks are not allowed to classify loans adversely until December 31, 2020, in line with the BB’s directives.
The central bank asked the banks not to be harsh while classifying loans. The original deadline for the facility was supposed to expire on September 30.
Besides, the repayment of all loan installments has been deferred from January 01 to December 31.
Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB), also managing director and chief executive officer (CEO) of Mutual Trust Bank Limited, sought fresh policy support from the central bank for rescheduling and restructuring of loans on the basis of ‘banker-customer’ relationship to cleanse the balance sheet.
Former MD and CEO of NRB Bank Limited Mehmood Husain said the sectors such as smaller enterprises, tourism, hospitality and transportation hit by the pandemic should be given extra time for rescheduling their loans so that they can revamp their business.
“We’ll have to give more emphasis on SMEs, which have adversely been affected by Covid-19,” the senior banker noted.
He said each bank should conduct a ‘stress test’ to review their financial health. A stress test is an analysis designed to determine the capacity of a financial institution to deal with an economic crisis.
“The banks should also expedite their own monitoring and supervisions to ensure proper use of the government’s financial stimulus packages,” according to him.
He also expressed the fear that improper implementation of the stimulus packages could deteriorate the NPL situation further.
The classified loan in the banking sector of Bangladesh is still the number one challenge, he added.
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