Underlining that in coming quarters non-performing loans may increase as recovery from the pandemic (COVID-19) remains slow, Moody’s has maintained that loans to the vulnerable sectors in Bangladesh such as garment, textile, tanneries and cement in Bangladesh will face significant pressure as they are yet to see expected recovery.
The global credit rating agency in an analysis while underlining that garment and textile sectors accounted for 19.4 per cent of banking system loans at the end of 2019 stated, “The true asset quality of loans will emerge across all sectors, and we expect significant pressure in loans to vulnerable sectors such as textile and RMG,” even as it maintained that garment-related exports, in the 9 months to September, fell by 19.8 per cent from the year-earlier period.
According to Bangladesh’s Export Promotion Bureau (EPB), between July and January (the first 7 months of the fiscal year), apparel shipment declined 3.44 per cent year-on-year to US $ 18.40 billion as Bangladesh’s key export destinations have been struggling to contain the impacts of the coronavirus pandemic.
We also expect loans in sectors such as tanneries and cement manufacturing to contribute to asset-quality stress because they have yet to recover from the economic slowdown, stated Moody’s while adding that it expects the system-wide NPL ratio to increase in the coming quarters.
Because of the expiration of credit moratorium period and weakening of the repayment capacity of borrowers, as a result of the COVID-19 shock, the analysis said the non-performing loans would increase in the coming quarters.
