The finance ministry will start performance review of the country's three state-owned commercial banks (SCBs) from today (Tuesday) following their failure to 'achieve default loan recovery target', officials said Monday.
Finance and planning adviser Mirza Azizul Islam will examine the performance of Janata Bank Limited, the country's second largest commercial bank, on the day while review on Sonali and Agrani banks will be conducted next week.
"The default loan recovery will get top priority during the review," said a senior finance ministry official, speaking on condition of anonymity.
"Non-performing loan (NPL) of all three banks have ballooned, undermining their financial health. The adviser wants to see why the banks have failed to reduce their NPL," he said.
Central bank deputy governor Nazrul Huda who heads the 'working group on SCBs restructuring' in a recent meeting reviewed the default loan recovery of the banks and termed their performance 'unsatisfactory'.
According to the review, the SCBs could only cut a fraction of the NPLs set by the central bank committee for the April-June quarter, while fresh loans have become classified during the period, pushing up the total bad loans.
Other issues like credit disbursement, cost of fund, operating cost and automation of the SCBs will also be discussed during the performance review, said the finance ministry official.
The three SCBs, which have been corporatised by the caretaker government in line with the suggestions of the International Monetary Fund and the World Bank, are implementing a four-year plan to improve their performance.
All three SCBs have been in bad financial health as they are gradually losing businesses to more efficient private banks while slow loan recovery and a huge NPL burden meant they could disburse only small amount of fresh loans.
From 64 per cent in as early as 2000s the SCBs' market share fell to 30 per cent in 2007.
Huge burden of non-performing loan, higher operating cost and poor service have been identified as the major causes behind the steep decline of SCBs' market share in the country's banking sector.
A central bank official said the NPL of the country's largest SCB, Sonali Bank Limited, has hit Tk 85.47 billion in June this year, which is about 44.35 per cent of its total loan.
But until March, the amount of its bad loan was Tk 71.52 billion, or 39.06 per cent of its total loan.
Sonali's NPL shot up during the period despite it recovered Tk 2.46 billion from the default creditors, said the official.
Janata recovered about Tk 960 million non-performing loan during the same period, but was still behind the target by almost 1.0 per cent. Its NPL stood at Tk 19.65 billion until June, which is 15.99 per cent of its total loan.
NPL of the country's third largest SCB, Agrani Bank Limited, still remained in the red, standing at 27.50 per cent of its total loan until June against the central bank-fixed target of 22.47 per cent.
The bank was supposed to recover Tk 1.35 billion NPL in the April-June quarter but could manage only Tk 980 million during the period. Its NPL reached Tk 29.92 billion at the end of the financial year.
To speed up bad loan recovery the central bank has recommended that the law ministry arrange 'analogous hearing', under which the SCBs will select all the identical cases and will settle them in one go.
