Dhaka, Bangladesh (BBN) – Bangladesh Bank on Monday asked nine new private commercial banks not to go for aggressive lending.
“We have reviewed the overall performance of the nine new banks at the meeting,” a Bangladesh Bank (BB) senior official told the BBN after a meeting.
The BB, central bank of Bangladesh, came with the order during a scheduled meeting with the chief executive officers (CEOs) and managing directors (MDs) of the nine banks.
The senior BB official also said the nine banks have been asked to reduce the volume of classified loans through strengthening recovery drives across the country.
BB Governor Fazle Kabir chaired the meeting held at the BB headquarters in Motijheel of Dhaka, the capital of Bangladesh
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.
Earlier, Bangladesh Bank officials told the BBN the BB could raise various issues, including rising trend in non-performing loans (NPLs) along with advance-deposit ratio (ADR) of the new banks.
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.
The new banks might be asked to strictly abide by the existing core risk-management guidelines for improving their efficiency, they said.
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.
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.