BB asks SoCBs to improve financial health

The central bank has asked four state-owned commercial banks (SoCBs) for taking effective measures to improve their financial health immediately through expediting classified loan recovery drives, officials said.
The instruction came at a meeting held at the Bangladesh Bank (BB) headquarters in Dhaka Thursday to review the memorandum of understanding (MoUs) of the four SoCBs --- Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank ---with BB Governor Atiur Rahman in the chair.
"The SoCBs will have to improve their overall financial health through strengthening of default loans recovery drives", BB Deputy Governor Abu Hena Mohammad Razee Hassan told reporters after the meeting.
He also said the SoCBs have also been asked for taking necessary steps to gear up disposal of pending cases, relating to default loans.
The BB's latest instructions came against the backdrop of rising trend of capital shortfall with the SoCBs in the recent months due to multiplying of non-performing loans.
The capital shortfall of SoCBs rose to Tk 14.41 billion in the second quarter of this calendar year from Tk 2.40 billion in the previous quarter of the same year.
On the other hand, the total amount of default loans with the SoCBs rose to Tk 197.19 billion during the April-June 2014 period from Tk 186.89 billion in the first quarter of this year, according to the central bank statistics.
 "We're not satisfied with the SoCBs' overall performances because of rising trend of both default loans and capital shortfall," the deputy governor said while replying to a query.
He also said the central bank asked the SoCBs to improve internal control and compliance in line with the BB's advice to check fraud and forgeries.
 "We've also instructed the SoCBs for taking necessary measures to properly implement the existing core risk guidelines to minimise their financial risks," the BB deputy governor noted.
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.
Talking to the FE, another BB official said the central bank advised the SoCBs to expand their businesses considering revised credit growth ceiling for 2014.
 "We've already revised the loan growth ceiling for the SoCBs for this calendar year considering their overall performances," the central banker noted.
The BB earlier re-fixed the loan growth ceiling for Sonali and Janata at 6.0 per cent and 10 per cent respectively, down from 8.0 per cent and 12 per cent in 2013.
While Agrani's loan growth ceiling stayed at the same level of last year at 10 per cent, Rupali's increased to 12 per cent for 2014 from 10 per cent in the previous year.
 "The credit growth of the SoCBs is still within the limit but the overall recovery target could not achieve during the period under review," the BB official said.
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 chief executive officers (CEOs)-cum-managing directors (MDs) of the banks were present in the meeting.
The central bank earlier signed the MoUs with the managements of the SoCBs to improve their financial performance by providing policy support.
 

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