The Asian Development Bank is likely to provide $500 million budget support in May for improving assets聽 quality of the ailing banking sector.
Economic Relations Division officials said that improving asset quality in the banking sector was among the conditions for the loan.
Distressed assets are financial assets or investments which are underperforming or experiencing financial difficulties.
The amount of distressed assets in the banking sector surpassed Tk 6.75 lakh crore at the end of 2023鈥�24 fiscal year which is much higher than the tolerable level.
The official also said that the interim government had recently fixed the matrix in consultation with ADB officials against the backdrop of growing distressed assets, affecting the banking sector.
Distressed assets include all kinds of non-performing loans鈥攔escheduled, restructured, written-off, and litigated loans.
Financial Institutions Division officials said that they had already made some groundwork to fulfil the ADB loan conditions.
A move has been taken to amend the draft Bangladesh Assets Management Company Act to set up a dedicated entity to deal with bad loans and risk assets of banks and non-bank financial institutions.
The act is likely to be renamed as the 鈥楧istressed Asset Management Ordinance鈥�.
In this regard, a five-member committee has been set up, led by Azimuddin Biswas, additional secretary at the FID.
The Awami League government that was ousted in last August in the wake of a mass uprising drafted the Asset Management Company Act in 2020 to create a platform for buying and selling defaulted or non-performing loans.
The law had yet not passed at the time of the Awami regime鈥檚 ouster.
Regarding the draft act, the World Bank had expressed reservation to the Awami League government, saying that the draft law did not recommend international best practices.
Other conditions of the ADB loan include tackling the growth of the distressed assets, particularly reducing the non-performing loans, and having fewer directors in the boards of the banks.
NPL in the country鈥檚 banking sector has skyrocketed by Tk 2 lakh crore in just one year, reaching a staggering Tk 3.45 lakh crore at the end of December 2024.
This sharp rise comes as a massive amount of toxic loans, previously swept under the carpet through data manipulation during the Awami League regime, have now been exposed.
At present, a private bank can have as many as 20 directors in its board with three from the same family, while a director鈥檚 tenure is 12 years maximum.
