Observers asked to ensure discipline in SoCBs\\\' lending

The newly appointed observers to four state-owned commercial banks (SoCBs) have been asked to ensure due diligence on part of the bank managements in loan sanctioning to plug the loopholes.
Officials said such instructions were made at a meeting held at the central bank headquarters in the capital Sunday, in the process of fixing the wrongs and setting things right in the banking system.      
Bangladesh Bank (BB) Governor Dr Atiur Rahman presided over the meeting that discussed modalities of work of the BB viceroys posted in the banks.
The observers have been assigned to oversee the risk management, internal control and compliance (ICC), internal auditing, human resource development and recovery of non-performing loans (NPLs) the SoCBs burdened with.
"We've appointed the observers to the SoCBs for improving financial health through proper implementation of the memorandum of understandings (MoUs)," the BB Governor, Dr Rahman, told the FE after the meeting.
He also said the observers will assist the boards of directors of SoCBs for improving rating and overall balance sheets that will help in building image of the banks on the global market.
Earlier on November 18, the central bank appointed the observers with sweeping oversights authority to help improve the banks' deteriorating financial health.
Executive Directors of the BB Mohammad Naushad Ali Chowdhury, Ahmed Jamal, Nirmal Chandra Bhakta and Abdur Rahim have been made observers respectively for Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank.
They are empowered to attend policymaking meetings, including those of board of directors, executive committee and audit committee, of the SoCBs to oversee their functions, according to the BB officials.
The total amount of classified loans with the six SoCBs stood at Tk 227.27 billion as on September 30, which was 21.82 per cent of their total outstanding loans.
"Weak corporate governance is the main problem of the SoCBs," a BB senior official said, adding that the NPLs are weakening other key financial indicators of the state-owned banks.
The central bank earlier had identified four major problems with the SoCBs. These are: unsatisfactory level of cash recovery from defaulters, weakness in internal control and compliance, inadequate automation, and lack of good governance.
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