Bangladesh should focus on accurately estimating NPLs using international standards: IMF
Immediate focus on NPL estimation and a reduction strategy is crucial to restoring financial stability, IMF Mission Chief for Bangladesh Chris Papageorgiou says
Bangladesh's financial sector must prioritise accurate estimation of Non-Performing Loans (NPLs) using international standards and create a comprehensive plan to mitigate these vulnerabilities, the International Monetary Fund (IMF) has said.
Speaking to BSS following an IMF mission visit to Dhaka from 24-30 September, the IMF Mission Chief for Bangladesh Chris Papageorgiou highlighted that NPLs, which are loans that remain unpaid, pose a significant threat to the stability of the country's financial system by limiting funds for new loans.
"Immediate focus on NPL estimation and a reduction strategy is crucial to restoring financial stability."
In addition, he pointed to other critical reforms, including conducting an asset quality review and implementing international best practices for banking recovery, as essential steps to prevent financial instability.
"Furthermore, implementing risk-based supervision, enhancing corporate governance, accelerating reforms to the regulatory framework, and enhancing the independence of the Bangladesh Bank should bolster the institutional and regulatory environment for lasting financial stability," he added.
He further noted that IMF, in collaboration with other development partners - the World Bank, Asian Development Bank (ADB), USAID, and the UK's FCDO - is assisting the task force formed by Bangladesh Bank to address vulnerabilities in the financial sector.
"The IMF, which has been a steadfast partner of Bangladesh for more than 50 years, provides financing assistance, policy advice and capacity development," the mission chief said.
The mission chief also laid emphasis on developing the domestic capital market to mobilise long-term financing to support growth.
The central bank has formed a task force for banking sector reform, with six experts on the financial sector as members of the taskforce.
The members are Special Envoy to the chief adviser on International Affairs Dr Lutfey Siddiqi, former central bank deputy governor Muhammad A (Rumee) Ali, Chairman of BRAC Bank PLC Meheriar M Hasan, former lead economist of World Bank's Dhaka Office Dr Zahid Hussain, Vice Chancellor of ZNRF University of Management Science Professor Dr M Zubaidur Rahman and Partner of the Hoda Vasi Chowdhury & Co Sabbir Ahmed, FCA.
BB Governor Dr Ahsan H Mansur is serving as the coordinator of the taskforce.
Apart from taking different measures to reform the banking sector, the taskforce will also publish a white paper.