BB asks banks to divert more funds to affected dists

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FE Report
The Bangladesh Bank (BB) has asked the government-owned commercial banks (GCBs) to allocate more funds to rehabilitate the cyclone-hit people in the country's southwestern districts.
The instruction came at a review meeting on the Memorandum of Understanding (MoU), signed with the banks in 2003, held at the conference room in the central bank Monday with the BB Governor Salehuddin Ahmed in the chair.
The BB signed the MoUs with Sonali, Janata and Agrani, which turned into public limited companies recently, which envisaged central bank policy support for improvement of their financial performances.
"We have asked the GCBs to allocate more funds from excess liquidity in addition to their farm credit targets amounting to Tk 14.0 billion in the Sidr-affected areas to help rejuvenate the economy of the region," the BB governor told reporters after the review meeting.
The managing directors (MDs) and chairmen of three GCBs and the central bank senior officials attended the meeting, official sources said.
He also asked the banks to make their field level officials more active in disbursement of agriculture credit as they have major role to play in this connection.
During the meeting, the chief executive officers of the GCBs pointed out some conditions attached to the existing MoUs. These include single borrower limit and credit growth cap that seek the BB's intervention in removing bottlenecks and improving their commercial operation.
The central bank chief assured the GCBs that it might consider easing the conditions through reviewing the existing MoUs that will be finalised within a month, the sources added.
"We've given a positive gesture to the GCBs in this regard," the BB governor said, adding that the central bank would ease the conditions.
He also said that the caps were imposed in 2003 on the state-owned banks in view of the situation existed at that time under separate MoUs, but the context has now changed with their conversion into public limited companies (PLCs).
The GCBs have already applied to the government for their recapitalisation and they will undertake a process to recruit fresh manpower to bring dynamism in the overall activities, the central bank governor added.
The central bank also asked the banks to intensify drive to recover overdue loans, particularly from top 20 defaulters of each GCB.
The BB's directives came against the backdrop of a rising trend of the classified loan portfolios of the GCBs in recent months.
The default loans in the three GCBs-Sonali, Janata and Agrani - stood at Tk 118.22 billion in September last, according to the central bank statistics.
The meeting, however, observed that the recovery of small and medium overdue loans improved to some extent, the sources noted.
The central bank will request the Ministry of Law to look into the legal complexities the banks are facing to recover mainly the large default loans, the BB governor said.
Regarding the excess liquidity, the BB governor said the amount of excess liquidity declined slightly in the recent months due to pro-active role played by the bankers and gradual return of confidence in the business community.
Excess liquidity of the scheduled banks stood lower at Tk 131.29 billion at the end of August last against Tk 142.79 billion as of end June, 2007, the BB's data showed.