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Bad loans alarming for economy: ICC,B
President Mahbubur Rahman of the International Chamber of Commerce, Bangladesh (ICC,B) has said continuous increase in bad loans is very alarming not only for the banking sector but also for the entire economy.
“Because of bad loans banks are faced with capital deficit. We’ve observed that the government has been providing recapitalisation funds to the nationalised banks to meet capital adequacy ratio set by the Bangladesh Bank,” he said.
The ICC, B President was addressing a workshop titled ‘Capital and Credit Risk Distribution’, organized by ICC,B.
Quoting banking sector experts, he said banks do not have enough technical expertise to properly analyse the loan files.
Besides, Rahman said, the defaulters were not being punished as the bankruptcy court is out of commission and this encouraged people to become debt dodgers.
Non-performing loans (NPL) in Bangladesh’s banking sector, according to reports published by the Bangladesh bank, have surged over Tk 800-billion (about US$10 billion).
The figure would have been much higher if bad loans had not been written off, which is around Tk. 45,000cr, said the ICC,B on Monday.
As a result, the banks are having difficulties in providing credit to those who are good borrowers for the expansion of their business or to new entrepreneurs.
“Besides, the situation is similar in the state-run specialised banks,” Rahman added.
ICC, B Banking Commission Chairman & CEO Bangladesh International Arbitration Centre Muhammad A. (Rumee) Ali said Bangladesh is going forward to achieve middle-income status by 2021 which created huge need for capital requirement in infrastructure sector.
“But because of bad loans banks are suffering from capital adequacy,” he said.
He told the participants (bankers) that to manage your capital is your utmost important duty. He also mentioned that alternative dispute resolution and mediation will be very much useful to reduce the bad debt of the commercial banks.
Chairman, Association of Bankers Bangladesh and Managing Director and CEO of Mutual Trust Bank Limited Anis A Khan said the world trade is moving towards digitisation and as such Bangladesh has to prepare itself to keep pace with the international trade. The bankers of our country must upgrade themselves through modern tools and rules. To become a good and efficient banker, one should experience the trade finance in the banking carrier.
He also said the Association of Bankers Bangladesh has been actively working with the Bangladesh Bank to develop the banking sector and create a corporate culture in the sector.