Bangladesh Bank has asked the four state-owned commercial banks (SoCBs) to take vigorous efforts immediately to reduce the volume of classified loans.
The public banks have also been advised to go for small and medium scale loans instead of large ones for minimising their risks, officials said.
The instructions were given at a meeting held at the central bank headquarters in the city Thursday to review the memorandums of understanding (MoUs) of the four SoCBs -- Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank -- with BB Governor Fazle Kabir in the chair.
The BB also asked the SoCBs for taking effective measures to improve their financial health immediately through expediting classified loan recovery drives across the country.
The BB's latest instructions came against the backdrop of rising trend of the overall non-performing loans (NPLs) in the banking sector particularly the SoCBs in the first quarter (Q1) of this calendar year.
The amount of NPLs with six SoCBs increased by nearly 15 per cent to Tk 272.89 billion during the January-March 2016 period from Tk 237.45 billion in the previous quarter.
"We've asked the SoCBs to reduce the volume of NPLs by hook or by crook," a senior official of the Bangladesh Bank (BB) told the FE after the meeting.
He also said the SoCBs have also been instructed to expedite their recovery drives for reducing the amount of classified loans. "There is no alternative to boosting recovery drives to improve their (SoCBs) financial health."
The chief executive officers (CEOs)-cum-managing directors (MDs) of the banks and four observers were also present in the meeting.
Earlier on November 18, the BB appointed the observers to the SoCBs for improving financial health through implementation of the MoUs properly.
The SoCBs have also been advised to be more careful in case of borrower selection and do due diligence when sanctioning fresh loans, according to the central banker.
He said the public banks have also been instructed to follow different prudential and regulatory limits properly.
"We've asked the SoCBs to improve internal control and compliance in line with the BB's advices to check fraud and forgeries," another BB official said.
The BB also instructed the SoCBs for taking necessary measures to properly implement the existing core risk guidelines to minimise their financial risks, the central banker added.
The BB earlier identified six core risk areas in the country's banking sector. The risk factors are: credit, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.
During the meeting, the SoCBs have been asked to expedite their credit flow to small and medium enterprises (SME) instead of large ones to minimise their risks, according to the BB official.
He also said the central bank is planning to include the target of SME loans in the MoUs of SoCBs to ensure increased disbursement of such loans.
"The SoCBs may easily expedite disbursement of small and medium-scale loans using their countrywide large network," the central banker explained.
The meeting also reviewed various issues, including recovery position of default loans, liquidity situation, credit growth, operating expenses and cost of funds of the SoCBs.
The central bank earlier had signed the MoUs with the management of the SoCBs to improve their financial performance by providing policy support.
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