Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is going to site with top executives of nine new private commercial banks on Monday to review their overall performance — with the issue of classified loans topping the agenda.
The Bangladesh Bank (BB) could raise various issues, including rising trend in non-performing loans (NPLs) along with advance-deposit ratio (ADR) of the new banks, according to the officials.
The new banks might be faced warning at the meeting against ‘aggressive’ profit targets for ensuing discipline in the country’s banking sector, they added.
The amount of NPLs of the nine banks jumped by 43.11 per cent or BDT 1.69 billion in the third quarter (Q3) of the current calendar year over that of the previous one, according to the central bank latest statistics
The volume of classified loans rose to BDT 5.61 billion as on September 30 last from BDT 3.92 billion three months ago. It was BDT 444 million as on December 31, 2015.
The BB officials said the amount of NPLs with two of the new PCBs increased significantly while the volume of another two took a downturn and one’s NPL burden remained unchanged.
At the meeting, the new banks might be asked to strictly abide by the existing core risk-management guidelines for improving their efficiency.
The central bank earlier had identified six core-risk areas on the flipside of the country’s banking sector.
The risk factors involve credits, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.
BB governor Fazle Kabir will chair the meeting, where chief executive officers (CEOs) and managing directors (MDs) may seek policy support from the central bank for expansion of their branch networks.
“We’ll ask the banks for taking effective measures to reduce their classified loans and strengthen their internal control and compliance,” a BB senior official told BBN in Dhaka.
He also said the central bank inspection teams have already unearthed different types of corruptions in disbursing loans by some of the new banks.
The central bank has already appointed an observer at a new bank to improve financial health through close monitoring and supervision, another BB official said.
Another new bank is facing conflict of interest among its directors, he added.
He also said the directors of the bank have recently submitted allegations against each other to the central bank and the finance ministry.
The CEOs of the banks will urge the central bank for relaxation of the branch-expansion policy for allowing them 2:1 ratio instead of the existing 1:1 for opening urban and rural branches, a senior CEO of a new PCB told BBN in Dhaka.
The nine banks are Meghna Bank Limited, Midland Bank Limited, Modhumoti Bank Limited, NRB Bank Limited, NRB Commercial Bank Limited, NRB Global Bank Limited, South Bangla Agriculture and Commerce Bank Limited, The Farmers Bank Limited and Union Bank Limited.
The new PCBs started their operations across the country in 2013 aiming to bring more unbanked people into the banking network.