The central bank has enhanced the credit-growth limits for three state-owned commercial banks (SoCBs) for this calendar year despite their soaring classified loans.
Officials said the annual lending-growth limits for Sonali, Janata and Rupali have been re-fixed at 10 per cent, 12 per cent and 15 per cent respectively, up from 6.0 per cent, 10 per cent and 12 per cent a year ago.
Agrani's loan-growth ceiling stayed at the same level as of last calendar year at 10 per cent.
"We've enhanced the credit-growth limits of the SoCBs in line with the ongoing monetary policy statement (MPS) along with their latest performances," a senior official of the Bangladesh Bank (BB) told the FE.
On July 26 last, the central bank of Bangladesh unveiled its 'cautiously accommodative' monetary policy for the first half of this fiscal year (FY), 2016-17, aiming to achieve maximum economic growth through boosting investment particularly in productive sectors.
The central bank has set the ceiling for private-sector credit growth at 16.50 per cent until June 2017 from 14.80 per cent a year ago.
The central banker has expressed the hope that such enhancement will help in expanding business activities particularly in productive sectors.
Also, the latest BB measure will help in achieving over 7.0 per cent GDP (gross domestic product) growth by the end of FY 17, according to the banker.
When asked, former BB Governor Salehuddin Ahmed said although the enhancement of their credit growth is needed to help achieve MPS targets, such measure is not appropriate if their performances are taken into consideration.
The former governor's observations are prompted by the non-performing loans (NPLs) having risen by nearly 41 per cent or Tk 50.96 billion of the three SoCBs in the first half (H1) of the current calendar year.
The aggregate amount of NPLs with the three SoCBs rose to Tk 175.75 billion as on June 30 last from Tk 124.79 billion as on December 2015. It was Tk 135.86 billion a year before.
"The BB should monitor and supervise such loans closely to ensure proper use of such credits," Dr. Ahmed said.
He also suggested quarterly review of the banks' performance to know real picture of their loans, in order to channel the money into proper fields of economic activities.
"The SoCBs should invest their funds in SME and agriculture sectors for minimising risk," the former governor noted.
The public banks are now empowered to sanction as well as disburse more loans by the end of this calendar year following enhancement of the lending limits.
"We've enough excess liquidity that is now being invested in money market along with government securities with lower interest rates," a senior official of the Sonali Bank Limited told the FE.
But the Sonali Bank wants to expand investment in the productive sectors through using its network across the country, he explained.
In 2015, the Sonali Bank's credit growth stood at negative 5.26 per cent while the Janata Bank achieved 9.9 per cent loan growth, the BB data showed.
On the other hand, credit growth of the Agrani Bank and Rupali Bank stood at 9.6 per cent and 11.9 per cent respectively in the last calendar year.
"Actually, we are still maintaining a cautious policy for sanctioning and disbursement of fresh loans to avoid any risk," a senior official of the Agrani Bank told the FE Sunday.
He also said most of the SoCBs are now concentrating more on small lending rather than large ones for minimising risk.
The central bank has set the credit-growth limit in line with the memoranda of understanding (MoU) signed between the BB and the SoCBs earlier for improving financial health of the public sector banks.
Under the deals, the BB calculates the credit ceiling excluding farm loans, staff loans and government borrowing from the four SoCBs.
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