A tough condition imposed by the International Monetary Fund (IMF) on the banking sector must be implemented by June. Commercial banks are required to disclose information on distressed assets as per the Basel-3 standards of international banking risk management norms. Disclosure of this resource to that standard would greatly increase it. At the same time, the trend of increasing the level of risk in the banking sector will also come out. In this, the banking sector will suffer an image crisis in the country. Likewise, the image will be questioned abroad. As a result, extra fee or commission has to be taken especially in case of opening of LC for foreign trade or import. This will increase business costs.

According to sources, the government has taken a loan of 4.7 billion dollars from the IMF with several conditions. By June, the central bank will have to publish data on distressed assets of commercial banks. This should not be done as usual. Disclosure should be made as per Basel-3 policy criteria. Still in the light of that policy, the central bank prepares the account of distressed assets of the banks. However, that policy is not fully followed. At the same time, the accounts of those assets are not disclosed directly. It is feared that if the information of distressed assets is published according to the international standards according to that policy, it may increase a lot. However, capital adequacy information against risk assets is disclosed on an average basis. At the same time, the income and expenditure information of the bank is also published.

Those concerned said that if the amount of distressed assets of the bank increases, the provision deficit will increase on the one hand. As a result capital deficit will also increase. If these two increase, the weakness of the banks will be more exposed. This may raise doubts about the overall condition of the banking sector in Bangladesh as well as abroad. Many banks may then impose a third-party guarantee, especially for opening foreign LCs. As a result, the guarantor bank will have to pay additional commission. It will increase the import cost. Overall business costs will increase. On the one hand, the traders will be affected, and the consumers may also be in trouble due to the increase in the price of the products.

According to sources, the central bank is already preparing information on risky assets of banks as per Basel-3 criteria. In the light of this provision deficit and capital deficit data is also being prepared. According to them, the amount of distressed assets will not increase much by that standard. A large portion of distressed assets are non-performing loans. Non-performing loans have now started to come down. Supervision has also been increased in banks. Steps have been taken to increase recovery of defaulted loans. Due to these reasons, the amount of distressed assets will also decrease.

The central bank may not release that information until June. Negotiations with the IMF will take some time. This information may be released later this year.

In this context, the former governor of the central bank. Salehuddin Ahmed said, the correct picture of the banking sector should be published. This will remove the confusion, as well as the real condition of the banks will be known. Some information is now being released due to IMF conditions. But this should be done by the central bank itself.

About the distressed assets, he said, the defaulted loans of the banks are increasing due to fraud in loan disbursement, non-disbursement as per rules. Due to this distressed assets are increasing. These would not have happened if good governance had been established in the bank. Now the confusion will be removed only by establishing good governance and showing the real picture of the banks.

In the light of Basel-3 principles, at least 10 percent of a bank’s total risk-based assets or Tk 500 crore, whichever is higher, should be kept as minimum capital. Apart from this, each bank in Bangladesh has been instructed to hold capital at an additional rate of two and a half percent to provide emergency protection. Now 14 banks have failed to meet capital requirements. Some banks hold more capital than required.

Earlier, the central bank’s annual financial stability report was published in August last year as per IMF conditions. It discloses loan rescheduling information on their terms. Which was not the case before. In this, some terrible information of the banking sector was published. Among them, in 2022, defaulted loans of Tk 64,000 crore were renewed with special concessions. The previous year in 2021, the renewal was about Tk 27 thousand crores. In a span of one year, defaulted loan renewals increased by nearly three-quarters. In this too it was not possible to rein in the data of defaulted loans.

The GDP figures are now published every three months on the advice of the IMF. It shows that the growth rate of GDP is decreasing. Earlier, the IMF raised questions about the GDP calculation. Inflation is now being calculated on their advice. As a result, the rate of inflation is not decreasing, but increasing. Earlier, despite the increase in commodity prices, there was a precedent for the rate of inflation to decrease. The IMF also raised questions about this.

In their terms, the value of the dollar has been somewhat market-based, increasing its value. They asked to make it more market oriented and increase the price. The interest rate corridor is increasing due to the announcement of the loan interest rate corridor.

Based on these experiences, the people concerned said that the central bank should be careful about the distressed assets of the banks.

The IMF said that by December 2026, banks must take steps to drastically reduce non-performing loans. Adequate provision or capital should be kept against risky assets or against defaulted loans. Arrangements should be made as per MoUs executed with government and private banks for provisioning against risky assets. At the same time, the terms of the MoU must be implemented.

By the International Accounting Standards Board for the banking sector

Developed International Financial Reporting Standards (IFRS) systems to be fully implemented by December 2027. This will bring back transparency in the accounting management of banks and will be of international standard.

The central bank itself has raised questions about the management of accounts of banks. Because they have no transparency. It is also challenging to implement.