Page 26 - ICE BUSINESS TIMES December 2019

First Thoughts

CAN

WE BANK

ON OUR

BANKS?

By Nasirra Ahsan

Moody, downgraded the Macro Profile for the banks
of Bangladesh from, ‘Weak’ to ‘Weak-‘, adding a
negative one-notch adjustment to Credit
Conditions. The credit rating agency was a party
pooper for an otherwise terrific year for the
Bangladeshi economy. Growth spurted to nearly 8
percent of GDP, RMG sector continued to dominate
the world market and political stability remained
as stable as one could hope for. Yet the thorn at the
side seems to be the ailing banking sector whose
soundness and safety remains uncertain due to
poor lending practices, a lack of corporate
governance and the government's interference.
Default loans at banks went up by a hefty 26.38
percent or Tk 19,608 crore last year, the highest
rise in seven years, exposing the precarious
condition of the banking sector. The amount of
non-performing loan (NPL) stood at Tk 93,911
crore at the end of 2018, up from Tk 74,303 crore a
year ago, according to data from the central bank.
The NPLs now accounted for 10.30 percent of the
banking sector's total loans, up from 9.31 percent
in 2017.
But before we delve further lets understand what
are NPLs and why they are bad for the economy.

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