The government and Bangladesh Bank have jointly adopted an 18-month plan to reduce non-performing loans (NPLs) and restore discipline in the banking sector.
The plan will focus on strengthening loan recovery, introducing new mechanisms for loan repayment and implementing reforms in the banking sector. Details of the plan are expected to be disclosed soon. Bangladesh Bank Deputy Governor Dr Habibur Rahman disclosed the plan at a press conference on Wednesday following the central bank’s quarterly monetary policy announcement.
He said policy measures including “bullet payment” and “one-time exit” facilities had been introduced to accelerate the recovery of defaulted loans.
Although implementation of some of these measures has been slower than expected, the central bank expects significant improvements in the banking sector over the next 18 months, Rahman said.
He said Bangladesh Bank was focusing not only on controlling inflation but also on keeping productive sectors of the economy operational.
“Controlling inflation cannot be achieved merely by changing credit and liquidity management. Improving the supply system, strengthening infrastructure capacity and ensuring a comfortable environment in the market are also necessary,” he said.
Rahman said coordinated initiatives were needed to strike a balance between production costs and inflationary pressures.
The 18-month plan comes as Bangladesh’s banking sector continues to face elevated levels of defaulted loans, creating pressure on banks’ capital, profitability and lending capacity.
The central bank has been pursuing measures to strengthen loan recovery and improve financial-sector discipline, while also seeking to support productive economic activity.
Rahman also noted that Bangladesh’s policy rate remained relatively tight in the context of inflation control, even as some other countries were moving toward lower interest rates.
The central bank’s latest monetary policy stance seeks to balance inflation management with the need to support economic activity, while banking-sector reforms and loan recovery measures are expected to address structural weaknesses in the financial system.
