July 18, 2024, 2:51 pm

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2019-06-17 22:28:03 BdST

IMF mission sounds alarm as banks' stressed assets soar

The International Monetary Fund (IMF) has expressed concern over the rising trend in stressed assets in the banking sector.

The Washington-based lender recommended that the quality of assets should be improved immediately.

Stressed assets are defined as the sum of gross non-performing assets plus restructured and rescheduled standard advances, the central bank explained.

The visiting mission expressed such concerns at an introductory meeting, held at the Bangladesh Bank (BB) headquarters in Dhaka on Sunday with BB governor Fazle Kabir in the chair.

A five-member IMF Article IV Consultation Mission, led by Daisaku Kihara, Division Chief, South Asia 2 Division, Asia and Pacific Department, of the global monetary watchdog is now assessing the country's overall macro-economic situation.

The IMF's latest observations came against backdrop of rising trend in stressed assets ratio as a percentage of total loans and advances in the banking sector.

The stressed assets' ratio climbed to 20.5 per cent in 2018 from 19 per cent from the previous year as the volume of non-performing assets and rescheduled advances went up, according to the BB's latest Financial Stability Report (FSR).

"The stressed assets ratio rose to 20.5 percent at end-December 2018, which was the highest in the past three years," the BB noted.

Within a year, gross non-performing loans (NPLs) ratio increased by 100 basis points, rescheduled standard advances ratio increased by 40 basis points and restructured advances ratio increased by 10 basis points, according to the report.

The rise in NPLs contributed mostly to the increase in stressed assets ratio in December 2018, it added.

The meeting also discussed the latest situation on both NPLs and loan rescheduling position, according to sources.

Besides, different macroeconomic issues, including foreign exchange reserves along with overall balance of payments (BoP) situation were discussed at the meeting, they added.

When contacted, a top central banker said the stressed assets along with loan rescheduling issues were discussed at the meeting with the IMF mission.

"Rescheduling is a recognised tool for managing NPLs but it should not be used improperly," the central banker told the FE.

The mission is expected to meet finance minister A H M Mustafa Kamal and senior officials of the ministry of finance (MoF) and the central bank during the visit that will conclude on June 27.

Bankers do not disagree.

"We've to improve our assets quality as early as possible," Syed Mahbubur Rahman, Chairman of the Association of Bankers, Bangladesh (ABB), told the FE.

Mr Rahman, managing director (MD) and chief executive officer (CEO) of Dhaka Bank Limited, said there is no alternative to improving the assets quality in the banking sector.

"The assets quality must be improved if we want to reduce our cost of fund," the senior banker noted.

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