Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has asked four state-owned commercial banks (SCBs) to take effective measures for reduction of default loans, particularly from the top 20 defaulters, to improve financial health of the banks.

The instruction came at a review meeting of the Memorandums of Understanding (MoUs) of four SCBs – Sonali, Janata, Agrani and Rupali – at the conference room of the Bangladesh Bank (BB) on Wednesday.

BB Governor Atiur Rahman was in the chair. Chief executive officers (CEOs) and managing directors of the banks were present at the meeting.

“We’ve asked the managing directors of SCBs to intensify their recovery drives through taking crush programs for reduction of classified loans,” BB Executive Director SK Sur Chowdhury said, adding that the SCBs have also been asked to gear up recovery of the classified loans from the top 20 defaulters through actively pursuing the cases pending with the courts as well as the parties directly.

During the meeting, the BB governor expressed dissatisfaction over the loans recovery performance of the banks and asked them to intensify the default loan recovery drives across the country.

The Sonali Bank Limited recovered only 0.7 percent of default loans from their top 20 defaulters during January-June period of this calendar year while the Janata Bank Limited realized 13 percent of such loans.

During the same period, Agrani Bank Limited recovered only 8.50 per cent of the loans from its top 20 defaulters while the Rupali Bank Limited realized 16.60 per cent, according to the central bank statistics.

The BB has taken the move against the backdrop of rising trend of the classified loan portfolios of the banks in the recent months.

The classified loans in the banking sector soared to BDT 233.79 billion as of June, 2010, up by BDT 8.96 billion or about 4.0 percent over the previous fiscal year.

The meeting reviewed various issues including recovery of the overall default loans, liquidity positions, credit growth, operating expenses and cost of funds of the SCBs.

BBN/SSR/SI-20Oct10-11:58 pm (BST)