The central bank warned nine new private commercial banks (PCBs) against 'aggressive lending' for the sake of discipline in the country's banking sector.
Officials said the PCBs in question at a meeting Monday were also asked to cut down volumes of their classified loans through expediting recovery drives across the country.
The instructions were given at the review meeting with chief executive officers (CEOs) and managing directors (MDs) of the banks in the central bank headquarters in the capital. Bangladesh Bank (BB) Governor Fazle Kabir presided.
The regulatory warnings came in the wake of a rising trend in non-performing loans (NPLs) in the new banks in the recent months despite close monitoring by the central bank.
The aggregate amount of classified loans of the nine banks jumped 43 per cent or by Tk 1.69 billion to Tk 5.61 billion in the third quarter (Q3) of the current calendar year. The figure was Tk 3.92 billion three months ago and Tk 444 million as on December 31, 2015.
"We've cautioned the banks against going for aggressive lending," a BB senior official told the FE after the stocktaking meeting was over.
He also said the bankers had been asked to comply with the existing rules and regulations relating to responsibilities of MDs and CEOs properly in order to ensure good governance in the sector.
"The central bank also told the bankers to strictly abide by the existing core risk-management guidelines for improving their efficiency," the central banker explained.
The BB earlier had identified six core risk areas in the country's banking sector. The risk factors are related to credit, asset and liability, foreign exchange, information technology, internal controls and compliance, and money laundering.
As a major matter of compliance for the banks, they were instructed to appoint independent directors immediately under a provision of the Banking Companies Act, the BB official noted.
At the meeting, the executives urged the central bank to relax the branch-expansion policy at the maximum, allowing them 2:1 ratio instead of the existing 1:1 in opening urban and rural bank branches.
They also sought relaxation of provisions on disbursement of minimum 30 per cent of agriculture loans of their total target by using their own network.
Under the existing policy, all local PCBs will have to disburse minimum 30 per cent of their total targeted farm loans using their own networks from the current fiscal year (FY) 2016-17.
The MDs and CEOs also urged the central bank to review the allocation of minimum 10 per cent of their net profits for running CSR (corporate social responsibility) activities.
"We've sought such policy supports from the central bank to face our challenges," Mohammed Nurul Amin, CEO and MD of Meghna Bank, told the FE after the meeting.
Mr Amin, also former chairman of the Association of Bankers, Bangladesh (ABB), said they will raise the issue relating to appointment of independent directors in their board meetings.
"Annual general meeting (AGM) will take final decision on the issue," the senior banker explained.
The nine banks are Meghna Bank Limited, Midland Bank Limited, Modhumoti Bank Limited, NRB Bank Limited, NRB Commercial Bank Limited, NRB Global Bank Limited, South Bangla Agriculture and Commerce Bank Limited, The Farmers Bank Limited and Union Bank Limited.
The bunch of new PCBs started off in 2013 with an avowed aim of bringing more unbanked people into the banking network.
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