Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has asked four state-owned commercial banks (SoCBs) to take effective measures for improving their financial health immediately through strengthening classified loan recovery drives, officials said.

The instruction came at a meeting held at the Bangladesh Bank (BB) headquarters in the capital Dhaka on Thursday to review the memorandum of understanding (MoUs) of the four SoCBs — Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank — with BB Governor Atiur Rahman in the chair.

“The SoCBs will have to improve their overall financial health through strengthening default loans recovery drives” BB Deputy Governor Abu Hena Mohammad Razee Hassan told reporters after the meeting.

He also said the SoCBs have also been asked for taking necessary steps to settle cases relating to default loans.

The BB’s latest instructions came against the backdrop of rising trend of capital shortfall with the SoCBs in the recent months due to multiplying default loans.

The capital shortfall of SoCBs rose to Tk 14.41 billion in the second quarters of this calendar year from Tk 2.40 billion in the previous quarter of the same year.

On the other hand, the total amount of default loans with the SoCBs rose to Tk 197.19 billion during the April-June 2014 period from Tk 186.89 billion in the first quarter of this year, according to the central bank statistics.

“We’ve also instructed the SoCBs for taking necessary measures to properly implement the existing core risk guidelines to minimise their financial risks,” the BB deputy governor noted.

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 control and compliance, and money laundering.

At the same meeting, the central bank also instructed the SoCBs to improve internal control through strengthening their own monitoring and supervisions to check fraud and forgeries.

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

BBN/SSR/AD-18Sept14-5:15 pm (BST)