Governor urges restructuring and partial loan write-off

Following the political transition, the actual magnitude of long-concealed non-performing loans (NPLs) has surfaced, prompting the central bank to instruct managing directors of commercial banks to strengthen loan restructuring efforts and apply the partial write-off scheme. At a bankers’ meeting, Bangladesh Bank Governor Ahsan H Mansur said that NPLs reached Tk 6.44 trillion in September, amounting to nearly 36% of total loans — the highest in the country’s history.

In June, the total NPL amount was Tk 2.11 trillion, while in December last year it stood at Tk 3.45 trillion. The government transition revealed concealed risks that had previously been masked.

On 4 December, Bangladesh Bank implemented a policy allowing banks to partially write off loans classified as impaired or loss-category. Sirajul Islam, Executive Director of the central bank, told TBS that MDs were asked to strictly comply with circulars aimed at rehabilitating distressed borrowers. He noted that the governor stressed partial write-off for heavily impaired loans.

A private bank MD said the governor advised extending rescheduling opportunities to borrowers willing to regularise their debts. The meeting also pointed out disparities in farm lending. Despite agriculture contributing 14–15% to GDP, it receives only 2% of loans. Banks were urged to increase this to above 10%.

The governor pushed for 20% annual growth in CMSME loans and assured that provisioning requirements would be reduced from 1% to 0.5%. Proposals to raise personal and credit card loan limits were also discussed.

Despite having a long-term restructuring scheme, NPLs continue to rise due to poor implementation. Bankers believe that a two-year grace period and minimal down payment expose depositors to risk. They also claim influential borrowers avoid negotiations after obtaining approval. Businesses argue banks obstruct the process, placing pressure on earlier reschedulers. Without fixing policy flaws, long-term restructuring will not succeed.

KhaborwalaAJ