Go tough to cut down classified loans

Annoyed about spiralling classified loans, government's finance authority asks state-owned commercial banks (SoCBs) to take "strong measures" to lessen the load of defaults that seriously impact overall financial situation.
Such strong message came after the Financial Institutions Division under the Ministry of Finance reviewed the major economic data until March of the public-sector commercial banks in presence of their top executives, sources said.
Data show that until March this year, the troubled BASIC Bank Limited had the highest 63-percent classified loans among the SoCBs, up from 57.23 per cent a year back.
Bangladesh Development Bank PLC (BDBP) had 33.97 per cent this March, down from 42.41 per cent in March last year.
Janata Bank PLC saw a sharp rise in the volume of classified loans during the period to 31 per cent, nearly doubling from 16 per cent in March last year and 18 per cent in March 2022. The bank's classified loans stood at Tk 304.95 billion, the highest in terms of volume among the state-owned banks.
Agrani Bank PLC had 28-percent classified loans in March this year, amounting to Tk 208.64 billion in a rise from Tk 148.06 billion or 20 per cent a year back.
Some 21 per cent of total loans of Rupali Bank PLC had gone classified until this March, amounting to Tk 103.57 billion, lower from 23 per cent in March last year as per the official count.
Sonali Bank PLC had 14.84 per-cent classified loans amounting to Tk 149.88 billion, up from Tk 120.67 billion or 13.57 per cent a year back.
The meeting, chaired by the FID secretary, observed that the performance of SoCBs, in the case of actual capital base, rise in classified loans, recovery of classified loans, the amount of written-off loans, recovery of written-off loans, and recovery of classified loans from top 20 defaulters was "very frustrating".
Data placed in the meeting show that the actual capital base of most of the SoCBs also deteriorated as of December 2023 compared to December 2022.
The capital shortage of Janata Bank increased to Tk 164.47 billion in December last from Tk 92.63 billion a year back.
Agrani Bank's capital shortage swelled to Tk 126.98 billion in 2023 from Tk 101.55 billion in the previous year. Rupali Bank's capital shortage also increased to Tk 65.21 billion from Tk 64.27 billion and BASIC Bank's capital shortage rose to Tk 74.53 billion in last December from Tk 64.01 billion in December 2022.
While Sonali Bank could manage to make a significant net profit in 2023, amounting to Tk 6.51 billion, compared to Tk 3.71 billion in 2022, most of the other SoCBs saw drastic fall in net profit in the year that ended last December, according to central bank data.
Janata Bank's net profit halved to Tk 550 million in 2023 against Tk 1.13 billion in 2022 and Tk 3.0 billion in 2021. Agrani Bank also saw a significant shrinkage in net profit to Tk 690 million last year from Tk 1.11 billion in 2022.
Rupali Bank secured Tk 543.5 million as net profit in 2023 compared to Tk 209.30 million in 2022.
Overshadowing all, BASIC Bank's net loss swelled to Tk 4.35 billion in 2023 from Tk 1.30 billion in the previous year.
Economists and analysts are concerned over the rise in non-performing loans in the banking sector, especially in the public-sector banks, and see "regulatory failure" behind the exacerbation of classified loans that led to cash crunch in banks.
The meeting on the banking sector underscored the need for enhanced efforts by the top executives of the banks for recovering the classified loans to improve the financial condition of the banks.
Also, the meeting asked the chief executives of the banks to do what is needed to resolve the cases pending with courts to recover the billions of taka stuck in legal tangles for years.

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