The non-performing loan ratio of nationalised commercial banks(NCBs) of Bangladesh experienced improvement but was at ‘unsustainably’ high in the first quarter of the current fiscal,2006-07 due to lower recovery rate, revealed Bangladesh Bank Quarterly released recently. The gross NPL ratio was 25.04 per cent for July-September period while in April-June period it was 31.38 per cent. Net NPL of the NCBs was at 15.79 per cent, the quarterly said.

The NPL ratio of the privatised commercial banks(PCBs) increased in the Q1 while for foreign commercial banks(FCBs) it remained at a negligible level. Total gross NPL for the banking sector declined to 14.30 per cent in September from 16.59 per cent in June. A Bangladesh Bank directive on loan write-off is a major contributing factor behind the overall improvement, said the quarterly.

Return on equity appeared to be stable for PCBs and FCBs but weakened significantly for Sonali Bank while return on assets increased for PCBs. Both disbursement and recovery of industrial term loans by all banks and non-bank financial institutions rose by 25.05 and 15.13 per cent in the first quarter of FY07 over the same period of FY06.

The Bangladesh Bank quarterly said the major challenges include adjusting to global energy prices, resolution of state-owned enterprises debt crisis, adoption of a sustainable financing strategy for budgetary deficit, recovery of default loans with banks, and improvement in the risk adjusted capital ratios of banks.