The Bangladesh Bank (BB) has issued a strict end-of-month deadline to commercial banks, instructing them to significantly downsize their Non-Performing Loans (NPLs) to clean up year-end balance sheets.

The directive was delivered on Sunday by BB Governor Dr. Ahsan H. Mansur during a meeting with top banking executives in Dhaka.

The Governor expressed “serious concern,” noting that the classified loan ratio in the banking industry had surged to nearly 36 per cent (Tk 6.44 trillion) by the end of September, up sharply from Tk 4.20 trillion in March.

Banks were instructed to strictly execute all recent BB circulars concerning policy support for ailing businesses and the partial write-off facility designed to cleanse balance sheets.

The central bank also instructed commercial lenders to increase their focus on digital transformation to ensure a cashless society, alongside boosting SME and agricultural financing.

Top executives, speaking on condition of anonymity, raised two main implementation challenges. Many struggling businesses seeking policy support lack the mandatory 2.0-percent down payment capacity.

Banks are required to assess a policy-support-seeker’s cash flow for the next 10 years, certified by a registered auditor, but bankers stated that the majority of applicants do not have certifiable cash flow, making them ineligible. Bankers expressed concern that granting facilities based on “fictional cash-flow calculations” would only create “fresh problems.”

Bankers also requested that the regulator reduce the current 1.0 per cent provisioning margin for financing SMEs back to the earlier rate of 0.25 per cent, and align nano-loan data with the Credit Information Bureau (CIB).