SCBs asked to downsize NPL
Thursday, 21 October 2010
Siddique Islam
The central bank has asked four state-owned commercial banks (SCBs) to take effective measures for reduction of non-performing loans (NPL), particularly from the top 20 defaulters, to improve financial health of the banks.
The instruction came at a review meeting of the Memorandums of Understanding (MoUs) of four SCBs - Sonali, Janata, Agrani and Rupali - at the conference room of the Bangladesh Bank (BB) Wednesday. BB Governor Atiur Rahman was in the chair.
Chief executive officers (CEOs) and managing directors of the banks were present at the meeting.
The central bank earlier signed the MoUs with the management of the SCBs aiming to improve their financial performance by providing policy support.
"We've asked the managing directors of SCBs to intensify their recovery drives through taking crush programmes for reduction of classified loans," BB Executive Director SK Sur Chowdhury told the FE.
He also said the SCBs have also been asked to gear up recovery of the classified loans from the top 20 defaulters through actively pursuing the cases pending with the courts as well as the parties directly.
During the meeting, the BB governor expressed dissatisfaction over the loans recovery performance of the banks and asked them to intensify the default loan recovery drives across the country.
The Sonali Bank Limited recovered only 0.7 per cent of default loans from their top 20 defaulters during January-June period of this calendar year while the Janata Bank Limited realised 13 per cent of such loans.
During the same period, Agrani Bank Limited recovered only 8.50 per cent of the loans from its top 20 defaulters while the Rupali Bank Limited realised 16.60 per cent, according to the central bank statistics.
The central bank has taken the move against the backdrop of rising trend of the classified loan portfolios of the banks in the recent months.
The classified loans in the banking sector soared to Tk 233.79 billion as of June, 2010, up by Tk 8.96 billion or about 4.0 per cent over the previous fiscal year.
Four SCBs topped the list of classified loans with Tk 121 billion or 20.50 per cent of the disbursed loans followed by Tk 65.11 billion or 3.69 per cent for private commercial banks. Classified loans for specialised banks were Tk 44.11 billion or 24.61 per cent with Tk 3.90 billion or 2.41 per cent in classified loans gone to foreign banks during the period.
Besides, the BB asked the SCBs to increase their combined market share through improving the quality of services.
The directive came against the backdrop of a falling trend in market share of the SCBs vis-a-vis that of the private commercial banks (PCBs).
"In 2008, the SCBs held 31.1 per cent of the total industry assets as against 33.1 per cent in 2007," the central bank said in its latest annual report, adding that the PCBs' shares rose to 54.2 per cent in 2008 as against 51.4 per cent of the previous year.
"We've also asked the SCBs to implement the existing core risk management guidelines properly for improving their efficiency," Mr. Sur said adding that the banks have been instructed to install automation system as early as possible.
The central bank 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.
The meeting reviewed various issues including recovery of the overall default loans, liquidity positions, credit growth, operating expenses and cost of funds of the SCBs.
The central bank has asked four state-owned commercial banks (SCBs) to take effective measures for reduction of non-performing loans (NPL), particularly from the top 20 defaulters, to improve financial health of the banks.
The instruction came at a review meeting of the Memorandums of Understanding (MoUs) of four SCBs - Sonali, Janata, Agrani and Rupali - at the conference room of the Bangladesh Bank (BB) Wednesday. BB Governor Atiur Rahman was in the chair.
Chief executive officers (CEOs) and managing directors of the banks were present at the meeting.
The central bank earlier signed the MoUs with the management of the SCBs aiming to improve their financial performance by providing policy support.
"We've asked the managing directors of SCBs to intensify their recovery drives through taking crush programmes for reduction of classified loans," BB Executive Director SK Sur Chowdhury told the FE.
He also said the SCBs have also been asked to gear up recovery of the classified loans from the top 20 defaulters through actively pursuing the cases pending with the courts as well as the parties directly.
During the meeting, the BB governor expressed dissatisfaction over the loans recovery performance of the banks and asked them to intensify the default loan recovery drives across the country.
The Sonali Bank Limited recovered only 0.7 per cent of default loans from their top 20 defaulters during January-June period of this calendar year while the Janata Bank Limited realised 13 per cent of such loans.
During the same period, Agrani Bank Limited recovered only 8.50 per cent of the loans from its top 20 defaulters while the Rupali Bank Limited realised 16.60 per cent, according to the central bank statistics.
The central bank has taken the move against the backdrop of rising trend of the classified loan portfolios of the banks in the recent months.
The classified loans in the banking sector soared to Tk 233.79 billion as of June, 2010, up by Tk 8.96 billion or about 4.0 per cent over the previous fiscal year.
Four SCBs topped the list of classified loans with Tk 121 billion or 20.50 per cent of the disbursed loans followed by Tk 65.11 billion or 3.69 per cent for private commercial banks. Classified loans for specialised banks were Tk 44.11 billion or 24.61 per cent with Tk 3.90 billion or 2.41 per cent in classified loans gone to foreign banks during the period.
Besides, the BB asked the SCBs to increase their combined market share through improving the quality of services.
The directive came against the backdrop of a falling trend in market share of the SCBs vis-a-vis that of the private commercial banks (PCBs).
"In 2008, the SCBs held 31.1 per cent of the total industry assets as against 33.1 per cent in 2007," the central bank said in its latest annual report, adding that the PCBs' shares rose to 54.2 per cent in 2008 as against 51.4 per cent of the previous year.
"We've also asked the SCBs to implement the existing core risk management guidelines properly for improving their efficiency," Mr. Sur said adding that the banks have been instructed to install automation system as early as possible.
The central bank 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.
The meeting reviewed various issues including recovery of the overall default loans, liquidity positions, credit growth, operating expenses and cost of funds of the SCBs.