Bangladesh has 57 Banks which is already operating in full fledge. Besides that there are non-banking financial institutions which are also providing banking service to this economy. Banking service in Bangladesh has a mix output in terms of performance and profitability. Moody’s recent report on Bangladesh has sketched the current scenario of Bangladesh’s banking sector and also gave an outlook for the future based on their professional assessment expertise and experience on the banking industries all over the world.
Moody’s report has some key findings on the recent banking sector scenario of Bangladesh. This report are prepared by Moody’s investor service. The outline of those findings are.
“The asset quality is deteriorating in the highly fragment banking system.”- the remark came on the recently published Moody’s outlook for Bangladesh banking system. Despite being a robust economy, Bangladesh is witnessing ever-growing trend in bad loans. The chronic deterioration in asset quality is ultimately hitting the banks’ profitability due to covering up for high credit cost.
For the nature of banking sector whose core job is to dealing with mass people’s money, bad loans are nothing new or unique. However, the pace it is growing is alarming. Aggressive endeavors by banks for portfolio target in this populated banking sector played substantial role for rise in NPL. Some other factors like lengthy judiciary process, uncertain business environment and no evidence of exemplary measures against habitual defaulters fuel the growth of piling bad loans. Countries like China, who drastically curbed their bad loan rate over the years, used social shaming as a technique to combat their bad rates. Then again, Malaysian government introduced separate Asset-Management companies to recover the non-cash collaterals by converting them to cash. In Bangladesh, in order to curb the bad rate, whereas due diligence on bank managements’ part is required, the judiciary process needs to be streamlined as well. Also, it is high time the banking sector altogether should take strict social measures against the habitual defaulters in order to combat their default culture.Download View