BB moves to curb bad loans

The central bank yesterday rolled out a new credit rating system to rein in spiralling bad loans.

The Internal Credit Risk Rating System (ICRRS) for banks will replace the Credit Risk Grading (CRG) model banks currently use to rate borrowers.

"The implementation of the new rating system will help banks reduce bad loans," said Fazle Kabir, governor of Bangladesh Bank, at the auditorium of the Bangladesh Institute of Bank Management in the capital.

The ICRRS refers to a system that analyses a borrower's repayment ability based on information about their financial condition.

It comprises 20 different rating templates for 20 industries, instead of just one template for all sectors like in the previous CRG model.

The guideline was launched following Finance Minister AHM Mustafa Kamal's recent remark that the country's total nonperforming loans, which is grazing Tk 1 lakh crore, will not increase any further.

About the NPL scenario, Kabir said, "It is a big concern for the industry."

About the finance minister's comment, he said it would be possible if all banks work together.

The growing NPL has been the most discussed issue in the banking industry in the last couple of years, said Abu Farah Md Nasser, an executive director of the BB.

The guideline will help banks reduce the NPL significantly, he added. 

The ICRRS will be applicable for all exposures save for consumer loans, small enterprises with total loan exposure of less than Tk 50 lakh, short-term loans, microcredit and lending to banks, non-bank financial institutions and insurance, according to the guideline.

The governor also said bankers would have to become more sensitive to borrowers' needs and address their genuine problems.

He called upon the banks to play a supportive role and nurse their clients.

"It is true that sometimes business operations get hampered due to delays in gas and electricity connections. But banks should not stop financing them midway instead of addressing their real problems."

Both borrowers and banks must have their own feasibility reports when borrowing and lending respectively, said the governor.

Husne Ara Shikha, deputy general manager of the BB, and Prashanta Kumar Banerjee, a professor of the BIBM, jointly gave a brief presentation on the ICRRS at the programme.