Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has asked the four state-owned commercial banks (SoCBs) for taking all out efforts immediately to reduce the volume of classified loans.
The SoCBs have also been advised to use all type of options –recapitalise fund, issuing bonds and enhancement of own profits – to meet their capital shortfall.
The instructions were given at a meeting held at the central bank headquarters in the capital Dhaka on Wednesday to review the memorandums of understanding (MoUs) of the four SoCBs — Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank — with BB Governor Fazle Kabir in the chair.
The public banks have also been asked for taking effective measures to improve their financial health immediately through expediting classified loan-recovery drives across the country.
The BB’s latest instructions came against the backdrop of rising trend of the overall non-performing loans (NPLs) in the banking sector particularly the SoCBs in December in the last calendar year.
The classified loans of the SoCBs jumped by more than 38 per cent or BDT 63.63 billion in the last calendar year despite close monitoring by the central bank, the BB data showed.
The amount rose to BDT 230.66 billion as on December 31 last year from BDT 167.03 billion on the same day of the previous year.
“We’ve asked the SoCBs to improve their overall financial health through reducing the amount of NPLs,” a BB senior official told BBN in Dhaka after the meeting.
He also said there is no alternative to boosting recovery drives to improve the SoCBs financial health.
“The SoCBs have also been asked to meet their capital shortfall immediately by using all types of options in this connection,” the central banker noted.
Currently, two of the four SoCBs faced a shortfall of capital in the final quarter of 2016 mainly due to higher volumes of their NPLs.
The state-owned banks have also been advised to go for handing out small-and medium-scale loans instead of large lending for minimising their risks.
The chief executive officers (CEOs)-cum-managing directors (MDs) of the banks and four observers were also present at the meeting.
The BB earlier had appointed observers to the SoCBs for improving financial health through implementation of the MoUs properly.
The meeting also reviewed various issues, including recovery position of NPLs particularly of top 20 default loans, liquidity situation, credit growth, operating expenses and cost of funds of the SoCBs.