Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has asked four state-owned commercial banks (SoCBs) to improve financial health through reducing the volume of classified loans.

The leading public banks have also been instructed to expedite SME (small and medium enterprise) lending particularly manufacturing sector rather than large loans to minimise their risks

The instructions were given at a meeting held at the central bank headquarters in Dhaka on Tuesday with Bangladesh Bank (BB) Governor Fazle Kabir in the chair.

The chief executive officers (CEOs)-cum-managing directors (MDs) of the public banks and four observers were present at the meeting.

The meeting was convened to review the progress in implementing memorandums of understanding (MoUs) and key financial indicators of the four SoCBs — Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank.

Talking to BBN, a BB senior official said the central bank has asked the SoCBs for taking effective measures immediately to reduce the volume of non-performing loans (NPLs).

He also said the banks have also been advised to take effective measures to expedite recovery of the classified loans through drives across the country.

The central bank’s latest instructions came against the backdrop of a rising trend in overall non-performing loans (NPLs) in the banking sector, particularly in the SoCBs, in the first half (H1) of this calendar year.

The total amount of NPLs with six SoCBs rose to BDT 345.81 billion during the period under review from BDT 310.26 billion on December 31, 2016. It was BDT 357.16 billion in the first quarter (Q1) of this calendar year.

At the same meeting, the public banks were also directed to improve their internal controls and compliance in line with the BB advice for checking fraudulence and forgeries, according to officials.

The central bank also instructed the SoCBs to take necessary measures to properly implement the existing core-risk guidelines to minimise their risks.

The BB 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 controls and compliance, and money laundering.

The meeting also reviewed various issues, including recovery position on default loans, liquidity situation, credit growth, operating expenses and cost of funds of the government banks.

The central bank of Bangladesh had earlier signed the MoUs with the managements of the SoCBs for improving their financial performance by providing policy support.