Bangladesh central bank chief asks banks to cut default loans to 25% by March

Central bank spokesperson says the governor warned that the special rescheduling opportunity would not be repeated

Bangladesh Bank Governor Ahsan H Mansur has directed commercial banks to reduce their non-performing loan (NPL) ratio to 25 percent by March, using a combination of restructuring, rescheduling, write-offs, and intensified recovery efforts.

The directive came during a meeting on Sunday with top executives of commercial banks, an official present at the session told bdnews24.com on Sunday.

According to the latest data, the banking sector’s NPL ratio stood at around 36 percent in September last year. Total non-performing loans at that time were Tk 6.44 trillion against a total loan portfolio of Tk 18.03 trillion.

At the bankers’ meeting, Ahsan urged banks to offer rescheduling to borrowers facing business losses under simplified conditions.

Bangladesh Bank’s spokesperson and executive director Arief Hossain Khan told bdnews24.com, “The governor emphasised the need to intensify loan recovery, noting that reducing the NPL ratio is essential. He also cautioned that the special rescheduling opportunity offered under the rules will not come again.”

A senior central bank official added that some bankers have been reluctant to extend rescheduling to all eligible borrowers.

“The governor instructed that loans should be rescheduled as generously as possible within policy guidelines,” he said.

Preliminary calculations suggest that by the end of December, the NPL ratio fell to 30.56 percent due to rescheduling. After adjusting for NPLs of five merged banks, the effective ratio stands at 25 percent, the official noted.

Governor Ahsan also reminded bankers that new lending is unlikely to rise significantly and pressed for stronger recovery measures.

He drew attention to loss-making foreign exchange houses owned by commercial banks, many of which are transferring salaries and other expenses abroad.

Arief said the governor urged banks to make these institutions profitable and directed a review under the 1974 Foreign Exchange Regulation Act to guide necessary actions.