Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has asked the four state-owned commercial banks (SoCBs) to focus on SME (small and medium enterprise) lending along with large loans to minimise risks, officials said.

The advice was given at a meeting held at the Bangladesh Bank (BB) headquarters in the capital Dhaka on Sunday to review the memorandums of understanding (MoUs) of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank.

BB Governor Fazle Kabir chaired the review meeting.

Public banks have also been advised to improve their financial health immediately through reducing the volume of classified loans, meeting sources said.

Talking to the BBN, a BB senior official said the central bank has the SoCBs to reduce their volume of classified loans through strengthening recovery drive across the country.

He also said there is no alternative but to boost recovery drive to improve their (SoCBs) financial health.

The SoCBs have been advised to expedite SME lending to bring unbanked people under the banking network, he added.

The BB’s latest instructions came against the backdrop of a rising trend in the overall non-performing loans (NPLs) in the banking sector, particularly in the SoCBs, in December 2018.

The total volume of defaulted loans with the six SoCBs rose to BDT 486.96 billion as of December 31, 2018, from BDT 373.26 billion on the same day of 2017.

The meeting also reviewed issues like liquidity situation, recovery position of NPLs, particularly top 20 defaulted loans, and credit growth of the SoCBs, the sources added.

They said the SoCBs have also been asked to be more careful in case of borrower selection and exercise due diligence properly while sanctioning fresh loans.

The public banks have already been asked to strictly abide by the existing core risk-management guidelines for improving their efficiency.

The BB earlier identified six core risk areas in banking — credit, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.

At the same meeting, the public banks have also been asked to improve their internal control and compliance in line with the BB’s advice to check fraudulence and forgeries.

The SoCBs were also advised to use all types of options—recapitalise fund, issuing bonds, own profits and reducing amount of the risk weighted assets—to meet their capital shortfalls.

The chief executive officers-cum-managing directors of the banks and four observers were also present at the meeting.

The central bank earlier appointed the observers to the SoCBs to improve financial health through implementing the MoUs properly.