Finance minister asks banks to keep Non-Performing Loans in control

Finance minister AHM Mustafa Kamal has advised the banking sector leaders to keep the Non-Performing Loans (NPLs) in control as the road ahead of economic recovery would be a challenging one.

He also stressed on putting a lid on the banks operating cost and reducing the cost-to-income (C/I) ratio.

The minister also advised to cut down unnecessary costs during this period.

Kamal said this at a video conference on Tuesday and discussed issues on how to bring the economy back on track and how best the government’s stimulus packages can be injected to the economy through the banking sector.

Alongside the finance minister, the video conference was participated by Bangladesh Bank governor Fazle Kabir, Bangladesh Association of Banks (BAB) chairman Nazrul Islam Mazumder, and Association of Banks, Bangladesh (ABB) chairman Ali Reza Iftekhar, said a press release.

During the video conference, Kamal sought inputs from all to develop a bond market for alternate financing of Bangladesh economy.

Mentioning that the banking sector is the lifeline of the economy, he reassured that the government will do everything in its capacity to support the banking sector to put the economy back to the pre-coronavirus situation.

BB governor Fazle Kabir apprised the finance minister about all the stimulus packages and the ongoing implementation of those.

He also assured the minister that the central bank will provide all the necessary policy support and guidance to keep the business community and banking sector stable.

BAB and ABB chairmen praised the government stimulus packages worth over Tk 986.19 billion to overcome the fallout of coronavirus on the economy. The overall size of the packages stood at 3.5 per cent of the country’s gross domestic product.

ABB chairman Ali Reza Iftekhar commended Bangladesh Bank’s initiatives and policy support to make available required liquidity to inject necessary funds to the businesses.

The central bank has already slashed cash reserve requirement (CRR) by 150 basis points to 4.0 per cent from 5.50 per cent to facilitate the banks to implement the government announced financial stimulus packages.

Iftekhar also appreciated central bank’s move to cut repo rate by 75 basis points to 5.25 per cent from 6.00 per cent.

Central Bank’s latest moves have helped the banks to manage their funds efficiently despite higher withdrawal pressure on cash, even as deposits shrink in the aftermath of coronavirus outbreak.

The ABB chairman said that the financial health of the banks is now most crucial to the recovery of the economy from the impact of coronavirus pandemic, as there is no alternative source to support and inject money into the economy.

He also requested for considering establishment of Credit Risk Guarantee Scheme for the banks to protect the loans and advances given under the recent stimulus packages.

BAB chairman Mazumder assured the finance minister of implementing all the suggestions and advices given by him.

He requested the minister and the central bank governor to extend the time frame from 30 June to 31 December 2020 regarding the downgradation of accounts.

The BB governor has said he will look into the matter when time will come.

At the end, both BAB and ABB chairmen thanked the prime minister, finance minister, and BB governor for their timely involvement and support during this difficult time.

The release said the chairmen of BAB and ABB will sit again soon to find out the modalities to implement the recommendations and suggestions discussed at the conference.

They will request all the banks to prepare a road map to implement the suggestions made and submit to their respective board.