State-run banks lose edge in big-loan financing
Tuesday, 30 October 2007
Country's state-run banks' term loan financing is on the decline, while the private banks have been consolidating their position in the business, reports bdnews24.com.
"This is not a positive sign. It seems that the state-run banks' operating incomes are declining in the face of increased operating costs. These banks will be in trouble when their operating costs exceed income," said former deputy governor of the Bangladesh Bank Khondkar Ibrahim Khaled.
"At some points, the government will have to provide subsidies, otherwise these banks will collapse," he added.
According to the Bangladesh Bank, the state-run banks' share in large-scale loan financing declined to 3.87 per cent in fiscal 2006-07 from 16.87 per cent in 2002-03.
The share of state-owned banks in term-loan disbursement started to dip after the Bangladesh Bank signed memoranda of understanding with them to help them pull out of financial straits brought on by huge bad debt.
The central bank set a 5.0 per cent ceiling on the state-run banks' loan growth rates.
"The state-run banks face unequal competition. They face restrictions in sanctioning loans while the private banks are free in this connection," Khaled said.
The private banks have been consolidating their position over time.
Private banks' term-loan financing accounted for 60.82 per cent of the total in 2006-07, up from 40.30 per cent in FY 03.
Non-bank financial institutions' share in total loans declined while the share of foreign banks' loans remained steady.
Sonali Bank Managing Director Aminur Rahman linked the decline in state-run banks' term-loan operations to their 'cautiousness'.
"We have become more cautious in issuing new loans. We are now emphasising recovery," he said,.
"We will increase our stake in overall disbursement through competition," he added.
The Bangladesh Bank figures show that the overall term-loan disbursement by all the banks and financial institutions tripled to Tk 123.8 billion in 2006-07 from Tk 39.7 billion in fiscal year 2002-03.
In fiscal year 2006-2007, the private banks sanctioned a total of Tk 75.3 billion in loans while the state-run banks issued just Tk 4.8 billion.
"I think this is a positive sign. It reflects that the government objective of increased private sector engagement in the financial sector is succeeding," said Bangladesh Bank Deputy Governor Nazrul Huda.
Huda said, "The increased role of private banks could help decrease politically motivated loans."
Citigroup's Country Officer for Bangladesh Mamun Rashid said: "We want to be identified with development."
He said banks should finance growth sectors such as textiles, pharmaceuticals, power and infrastructure.
"We should support the growth of these proven sectors if we want to do businesses here," he added.
"This is not a positive sign. It seems that the state-run banks' operating incomes are declining in the face of increased operating costs. These banks will be in trouble when their operating costs exceed income," said former deputy governor of the Bangladesh Bank Khondkar Ibrahim Khaled.
"At some points, the government will have to provide subsidies, otherwise these banks will collapse," he added.
According to the Bangladesh Bank, the state-run banks' share in large-scale loan financing declined to 3.87 per cent in fiscal 2006-07 from 16.87 per cent in 2002-03.
The share of state-owned banks in term-loan disbursement started to dip after the Bangladesh Bank signed memoranda of understanding with them to help them pull out of financial straits brought on by huge bad debt.
The central bank set a 5.0 per cent ceiling on the state-run banks' loan growth rates.
"The state-run banks face unequal competition. They face restrictions in sanctioning loans while the private banks are free in this connection," Khaled said.
The private banks have been consolidating their position over time.
Private banks' term-loan financing accounted for 60.82 per cent of the total in 2006-07, up from 40.30 per cent in FY 03.
Non-bank financial institutions' share in total loans declined while the share of foreign banks' loans remained steady.
Sonali Bank Managing Director Aminur Rahman linked the decline in state-run banks' term-loan operations to their 'cautiousness'.
"We have become more cautious in issuing new loans. We are now emphasising recovery," he said,.
"We will increase our stake in overall disbursement through competition," he added.
The Bangladesh Bank figures show that the overall term-loan disbursement by all the banks and financial institutions tripled to Tk 123.8 billion in 2006-07 from Tk 39.7 billion in fiscal year 2002-03.
In fiscal year 2006-2007, the private banks sanctioned a total of Tk 75.3 billion in loans while the state-run banks issued just Tk 4.8 billion.
"I think this is a positive sign. It reflects that the government objective of increased private sector engagement in the financial sector is succeeding," said Bangladesh Bank Deputy Governor Nazrul Huda.
Huda said, "The increased role of private banks could help decrease politically motivated loans."
Citigroup's Country Officer for Bangladesh Mamun Rashid said: "We want to be identified with development."
He said banks should finance growth sectors such as textiles, pharmaceuticals, power and infrastructure.
"We should support the growth of these proven sectors if we want to do businesses here," he added.