Performance of Banking Industry

Repo Rate lowered to
5.25%
 Fall in CRR to
3.50% (daily basis)
& 4.00% (bi-weekly
basis)
Exhibit 1: Government initiatives to support businesses & strengthening banks’ liquidity
Banking Industry of Bangladesh was adversely affected by the covid-19 pandemic during
the FY2020. The internal and external affairs of the financial market caused significant
pressure on the sector as a whole. To assist the banks to survive in this critical situation
Bangladesh Bank (BB) has declared a series of policies and prudential measures from the
inception of the pandemic.
As a part of initiative to support the economy from the negative fallout due to the
pandemic, BB took several measures. The central bank lowered the repo from 6.00% to
5.25%, followed by a reduction of the cash reserve requirement (CRR) from 5.00% to
3.50% on a daily basis, and 5.50% to 4.00% in bi-weekly basis. Moreover, BB eminent
the advance/investment deposit ratio (ADR/IDR) by 2.00%, increasing ADR to 87.00%
for conventional banks and IDR to 92.00% for Shariah-based Islamic Banks. In addition,
BB stated several schemes for refinancing to aid in the credit flow to businesses and
households.

350

300

250

200
Through Banks
150
Through BB Refinance
100 Schemes

50

0
Industries and Service Sector Cottage, Micro, Small and
Medium Enterprises
*Figure in BDT Billion

As shown in the graph above, the government initiated interest payment subsidies for
working capital loans by banks to the businesses, with BDT 330 billion to industries and
service sectors plagued by the coronavirus pandemic and BDT 200 billion loans provided
to Cottage, Micro, Small and Medium Enterprises (CMSMEs). In this regard, BB
introduced refinance schemes of BDT 150 billion and BDT 100 billion respectively to
Comparison to ensure sufficient liquidity of banks.
June 2019: Bangladesh Bank has taken measures like relaxation over non-performing loan
 Bank deposits classification, waiver of credit card interests & penalties for delay in repayment,
increased by postponing loan payments with no additional penalties; imposing restrictions on bank
10.61% in June dividend payments etc. Classification of loans has not changed since January 1 till
2020 December 31 of 2020 even during failure to pay back the loan. BB also instructed the
 Demand deposits banks to extend the repayment tenure of existing term loans by up to two years.
increased by Bangladesh Bank has also provide relaxation on loan installment and as per Bangladesh
14.64% in June Bank Circular financial institutions can rearrange the numbers of installments for the
2020 short and long term borrowers who are unable to pay the due installments between
 time deposits January 1 to December 31 of 2020 against their loans, lease and advances.
increased by
10.48% in June Bank deposits (excluding inter-bank items) increased by BDT 1,217,840.00 million or
2020 10.61% at the end of June 2020 as compared to June 2019 when the growth rate was
9.89% compared to December 2018. The rise in total bank deposits was shared by all
kinds of deposits. Demand deposits increased by BDT 173,110.00 million or 14.64% to
 BDT 1,355,280.00 million in at the end of June 2020 against 4.42% increase at the end
of June 2019. Besides, time deposits increased by 10.48% in June 2020 against 10.67%
increase as compared to June 2019. Government deposits increased by BDT 5,320.00
million or 6.43% to BDT 880,990.00 million in June 2020 against 9.20% increase
compare to the data of June 2019.
Exhibit 2: Credit and Deposit of Banking Industry
Particulars June 2020 June 2019 2019 2018 2017 2016
Deposits (BDT in 12,690,990 11,473,150 12,219,640 10,440,950 9,874,890 8,933,920
Millions)
Credit (BDT in 10,940,070 10,041,810 10,520,930 8,994,930 8,050,850 6,787,940
Millions)
Deposit Growth (%) 10.61 9.89 17.04 5.73 10.53 12.10
Credit Growth (%) 8.95 11.64 16.97 11.73 18.61 13.58
Source: Monetary Policy Department and Statistics Department, Bangladesh Bank.

On the other hand, outstanding bank credit (excluding foreign bills and inter-bank items)
in FY2020 rose by 8.95% at the end of June 2020 as compared to previous year’s same
 Rise in the
period and the growth rate was 11.64% in FY2019 (June) as opposed to the December
bank credit by
2018. The rise in the bank credit occurred due to increasing of advances by banks while
8.95%
bills purchased and discounted by banks slightly decreased in June 2020. Advances
 Advances
increased by BDT 964,390.00 million or 9.91% in June 2020 against the increase of
increased by
11.74% compare to June 2019. Bills purchased and discounted decreased by BDT
9.91%
66,130.00 million or 21.63% in at the end of June 2020 against the increase of 8.40%
which was at the end of June 2019.
Exhibit 3: Gross NPL Ratio of Banking Industry (in percentage)
Particulars 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
State Owned
11.3 23.9 19.8 22.2 21.5 25.1 26.5 30.0 23.9 22.7
Commercial Banks
Specialized Banks (DFI) 14.6 26.8 26.8 32.8 23.2 26.0 23.4 19.5 15.1 15.9
Private Commercial
2.9 4.6 4.5 4.9 4.9 4.6 4.9 5.5 5.8 5.9
Banks
Foreign Commercial
3.0 3.5 5.5 7.3 7.8 9.6 7.0 6.5 5.7 5.5
Banks
Total 6.1 10.0 8.9 9.7 8.8 9.2 9.3 10.3 9.32 9.2
Source: Banking Regulation and Policy Department (BRPD), Bangladesh Bank
*June 2020

The overall NPL of the banking industry stood at 9.32% as on December 31, 2019. The
NPL fell further to 9.2% as on June 2020. The reduction of NPLs was affiliated with “One
Time Exit Policy” for bad loan rescheduling offered by Bangladesh Bank at the beginning
 NPL fell of FY2020 and scaled up efforts for loan recovery by banks. Gross NPL for both SCBs and
further to FCBs went down to 22.70% and 5.50% as on June 30, 2020. Overall provisioning against
9.2%
classified loans further improved at the end of second quarter of FY2020, however, SCBs
 Net NPL ratio
fell to 0.15% witnessed deterioration. The system-wide net NPLs of the banking industry witnessed an
improvement, Net NPL ratio of the banking sector was 1.02% in December 2019 which
fell to 0.15% at the end of June 2020.