The International Monetary Fund (IMF) has handed the government a three-pillar recommendation for improving the overall financial health of the state-owned commercial banks (SoCBs).
Ensuring good governance in banking, recapitalisation, and completing automation process of all branches of the SoCBs by the end of this calendar year form the bedrock of the recovery recipe.
 "We've given the three-pillar recommendation to the government for improving the financial conditions of the SoCBs," Changyong Rhee, director of IMF's Asia and Pacific Department, told the FE recently.
He explained their main initiative as recovery of financial health of the public banks in Bangladesh, some of which are affected by recent financial scams.
The IMF recommendations came against the backdrop of deteriorating trend in the overall financial health of the SoCBs despite a two-pronged monitoring by both the country's central bank and the Ministry of Finance.
Capital shortfall is a major syndrome of late, needing repeated recapitalization from state coffers. The capital shortfall of the six SoCBs stood at Tk 121.10 billion, as on September 30 last calendar year, according to the central bank statistics.
A total of Tk 150 billion has already been sought from the ministry of finance for three fiscal years to feed the cash-strapped six out of total eight state-owned banks, said a senior official familiar with the developments.
The government has already injected into the BASIC Bank Limited some Tk 12 billion for exclusively replenishing its waning capital.
The six state-owned banks, which faced capital shortfall as on September 30 last, are Sonali, Janata, Rupali, BASIC, Krishi and Rajshahi Krishi Unnayan Bank.
"It is an ongoing reform that requires steady efforts over the medium term," Dr Rhee noted.
The IMF executive also said strengthening state-owned banks would hinge critically on improving the quality of their lending practices, which in turn will depend on making sure that the management and executive boards of these banks exercise proper, professional oversights and are held ultimately accountable by the central bank of Bangladesh and the government.
The total amount of non-performing loans (NPLs) with the six SoCBs increased to Tk 237.45 billion, as of December 31 last, from Tk 232.09 billion a year before.
However, provisioning shortfall of the six SoCBs entered into negative territory with Tk 45.67 billion as on December 31, 2015 from Tk 6.69 billion surplus a year ago.
The IMF is now working with the authorities on enhancing financial supervision and regulation for the strengthening of the financial sector of Bangladesh.
"This included broadening the powers of Bangladesh Bank (BB) through the amendments to the Bank Companies Act (passed in July 2013)," the IMF director added.
He also said the Washington-based Bretton Woods institution provided dedicated technical assistance for strengthen BB's capacity on banking supervision and regulation.
"The authorities are making progress in this regard. Avoiding regulatory forbearance will be critical for success going forward," Dr Rhee observed.
siddique.islam@gmail.com
IMF gives recipe to govt for healing SoCBs’ health
Siddique Islam | Published: February 24, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
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