FROM PAGE B1

four factors drove the decline in non-performing loans at the end of December.

Many banks partially wrote off large volumes of bad loans, with some writing off between Tk 300 crore and Tk 1,500 crore.

The second factor was the BB policy support, Arefin said. “Policy support played a role but was not the main driver.”

“Only about 42 percent of the policy support was implemented. In other words, if policy support worth Tk 100 was approved, only around 42 percent was actually executed,” said the ABB chairman.

He labelled recovery drives by banks in December last year as the third factor, which he said helped banks claw back a large chunk of loans.

Besides, he said some loans could not be classified as default due to court stay orders, which also contributed to the decline.

At the end of December last year, bad loans at state-owned banks stood at Tk 1,46,107.59 crore, or 44.44 percent of their total disbursed amounts, according to BB data.

Private commercial banks recorded Tk 3,89,579 crore in non-performing loans, equivalent to 28.25 percent of disbursed loans. Foreign banks held Tk 2,983.77 crore, or 4.51 percent, according to BB data.

Specialised banks reported Tk 18,546.47 crore, or 39.74 percent, in bad loans.

Moinul Islam, former professor of economics at University of Chittagong, said rescheduling loans on overly easy terms is not a lasting solution for reducing bad loans.

The economist said that while such measures may temporarily reduce reported figures, they do not actually solve the underlying problem.

“Strict measures must be taken against defaulters. Separate tribunals should be formed for the top 10 defaulters of each bank in order to recover their defaulted amounts,” he suggested.

After the rescheduling and restructuring, the banking sector now faces a provision shortfall of Tk 1,91,441 crore.

In 1999, bad loans in the banking sector stood at a record 41.1 percent. The ratio gradually declined and reached 6.1 percent in 2011.