Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has asked two state-owned specialised banks (SBs) to reduce the volume of classified loans immediately through expediting recovery drives across the country.
The instructions were given at a meeting at the central bank headquarters in the capital on Monday with Bangladesh Bank (BB) Deputy Governor Abu Hena Mohd. RazeeHassan in the chair.
The meeting reviewed the progress of implementing the memorandums of understanding (MoUs) and key financial indicators of Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB).
The BB’s latest instructions came against the backdrop of rising trend of non-performing loans (NPLs) of the two public banks dedicated to promote the agriculture sector.
The overall non-performing loans (NPLs) in the two banks increased by more than 10 per cent or BDT 5.29 billion to BDT 58.17 billion in the fiscal year (FY) 2015-16 from BDT 52.87 billion at the end of previous fiscal year.
The SBs faced capital shortfall in the FY16 mainly due to the increased volume of their classified loans, according to the BB officials.
The aggregated capital shortfall of the two banks increased by over 14 per cent or BDT 10.13 billion to BDT 81.14 billion in June 2016 from BDT 71.01 billion in June 2015, the BB data showed.
“The central bank has asked the banks for taking vigorous measures in reducing the classified loans that will help improve their financial health,” a BB senior official told BBN in Dhaka.
He said the public banks have been advised to expedite credit disbursement to the agriculture sector as well as small and medium enterprises (SMEs) instead of providing large loans to minimise the risks.
The public banks have also been asked to improve their internal control and compliance along with properly implementing the existing core risk guidelines to minimise their risks.
The central bank had earlier identified six core risk areas in the country’s banking sector — credit, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.
The meeting also reviewed other issues, including recovery position of default loans, liquidity situation, credit growth, operating expenses and cost of funds of the public banks.