IMF for bringing bad loans down to global standards
The International Monetary Fund (IMF) has recommended that the definition of non-performing loans be brought down to international standards.
Otherwise, questions will arise about Bangladesh's banking sector in the international arena, they said in a meeting with the central bank on Monday.
The IMF team also asked the central bank to publish correct information on default loans. According to the Washington-based international lender, the ratio of defaulted loans is much higher than the central bank's data, said sources in the know about the discussion.
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According to international standards, the default loan ratio of up to 3% is deemed tolerable, while in Bangladesh, this ratio is about 9% and it is more than 20% in government banks.
The visiting IMF delegation discussed the banking supervision update, strategic planning for the financial sector and risk management issues with the Bangladesh Bank's with the Off-site Supervision Banking Regulation and Policy Department, said officials with knowledge of the meeting. Deputy governors AKM Sajedur Rahman Khan, Abu Farah Md Nasser and senior officials of the central bank took part in the discussion.
The central bank has presented various stimulus packages and policy measures to the IMF to reduce non-performing loans to keep economic activities running during the pandemic, said Bangladesh Bank's spokesperson GM Abul Kalam Azad.
The central bank's discussion was fruitful and discussions will continue till November 9, he noted.
In the first meeting with the IMF on 27 October, the Bangladesh Bank had assured the IMF that it would soon lift the existing lending rate cap and leave the country's foreign exchange market to a free-floating exchange rate system.
The IMF delegation arrived in Bangladesh on 26 October to discuss conditions for releasing $4.5 billion loans for budget support to the country.
Bangladesh's mission chief and senior economist of Washington-based international lender Rahul Anand led the IMF team in the discussion with Bangladesh.
