The overall efficiency ratings of the country's banking sector declined slightly last year due mainly to higher volumes of non-performing loans the banks were burdened with, officials said on the basis of latest evaluation.
It was found out that the efficiency ratio of all banks stood at 77.81 per cent that means the banks spend around 78 paisa to earn Tk 1.0 during the year 2013. The ratio figure was nearly 74 paisa a year ago.
The aggregate efficiency level of specialised banks was at its worst, 94.83 per cent in the bygone year. The state-owned commercial banks (SoCBs), private commercial banks (PCBs) and foreign commercial banks (FCBs) had the ratio counts as 84.07 per cent, 77.90 per cent and 50.40 per cent respectively.
A latest report published by Bangladesh Bank (BB) Tuesday revealed the downward efficiency ratings of the banks in their banking operations.
"The banks have to apply due diligence for both sanctioning and disbursement of loans properly to avoid adverse classification of loans which has the highest impact on the efficiency ratio," a BB official told the FE about the remedies.
Besides, the banks have to be more careful against fraud and forgery that may occur in connivance with their own employees, he observed with regard to the much-talked-about malpractices that have shaken some of the banks in recent times.
"The banks will have to improve internal control system through improving efficiencies of their officials concerned alongside giving freedom of work," the central banker noted.
The amount of default loans jumped to Tk 427.26 billion in 2012 from Tk 226.4 billion in the previous calendar year, according to the report on recent initiatives in the Department of Off-site Supervision (DOS) of the central bank.
"The volume of classified loans almost doubled in 2012 following large-scale financial irregularities in different commercial banks," another BB official explained.
He also said the central bank is now working to ensure credit discipline in the country's banking sector through strengthening its monitoring and supervision.
The position of NPL stood at Tk 405.83 billion in 2013 following a substantial amount of loan having been rescheduled by the banks by banking on advantage yielded by relaxation of the loan- rescheduling policy.
Earlier on December 23 last year, the central bank relaxed the rescheduling policy on a limited scale for the next six months to facilitate the financing for the businesses affected by political unrest.
The amount of classified loans increased significantly in the first quarter (Q1) of 2014 due mainly to lack of proper oversights on rescheduled loans.
The volume of classified loans increased 18.70 per cent to Tk 481.72 billion in the January-March period of 2014 from Tk 405.83 billion this quarter of the last calendar year, the BB data on the dud money showed.
"We're trying to strengthen our both off-site and on-site supervisions for ensuring stability in the country's banking sector," Abu Hena Mohammad Razee Hassan, deputy governor of the BB, said.
He spoke of the corrective measures while addressing the report-launching ceremony at the central bank headquarters in Dhaka.
He also said the central bank has already taken different measures, including scrutinizing of the banks' balance sheets, to curb financial irregularities in the banking sector.
Among others, BB Executive Directors SM Moniruzzaman and Mohammad Naushad Ali Chowdhury and General Manager of the DOS SM Rabiul Hassan also spoke on the occasion.
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