FE Today Logo

No more feather-bedding

Finance minister tells state banks; earn profits to get employees' salaries, he says

FE Report | August 26, 2019 00:00:00

Finance Minister AHM Mustafa Kamal on Sunday made it abundantly clear that state-owned banks would no longer get recapitalisation facility.

"From now on, refinancing will be a thing of the past," he told reporters after a meeting with chairmen and chief executives of state-owned banks in Dhaka.

"We won't provide money for refinancing. This is the final verdict," he said, adding bank executives will have to make profit to get salaries.

The minister said he has asked the bank high-ups to prepare a work plan within a week, which will be reviewed later.

Mr Kamal said though the banks would not be given money, they will be given necessary policy support.

No allocation was set aside for recapitalisation of state lenders in the current fiscal's budget, he said, adding this will be followed going forward.

Data available with the ministry of finance shows that between 2012 and 2018, the government paid some Tk 125 billion to state-run banks in recapitalisation.

The minister said Sonali, Janata, Agrani, and Rupali banks control a quarter of deposits held by commercial banks in the country.

They have huge resources and the government wants them to make at least 15 per cent profit, the businessman-turned politician said.

Turning to the issue of troubled loans, Mr Kamal said the volume of non-performing loans in the banking sector has not increased.

After assuming office as the finance minister early this year, the minister had said such loans would not go up anymore.

Still, the first quarter of the year saw a pickup in the non-performing loans in the banking system.

"I won't accept that NPL has increased," he said, adding the soured loans situation can be reviewed only after the exit plan for loan defaulters takes effect.

Mr Kamal said once the exit plan becomes effective the NPL will decline.

Asked whether the non-implementation of the exit plan is the only reason why NPL had not decreased, the minister agreed with it.

Businesses are not returning money since the exit plan is embroiled in a court ruling, he said.

He said the special privilege for defaulters was targeted at both for bad and good businessmen.

But now neither the bad, nor the good businessmen are repaying money, he said.

"We will soon resolve the issue. And then we will be able to review the situation," he said.

Regarding the interest rate of bank loans, the minister said a circular will be issued soon on lowering interest rate at a single-digit.

He also said the country has invested a lot in the infrastructure sector which will pay off soon.

The minister said the GDP growth will rise further, supported by the return on investments.

On the global recession forecast, the minister said the luxury products may be affected if the downturn hits the global economy.

But Bangladesh mainly exports basic products, thus there is no chance for export reduction, he said.

"Our share market won't also be affected in this case because there is no significant foreign investment in our capital market," Mr Kamal said.

Financial institution division senior secretary Asadul Islam, finance secretary Abdur Rouf Talukder, and economic relations division secretary Monowar Ahmed attended the meeting, among others.

[email protected]

Share if you like