The NCBs and the Bangladesh Bank will sign a fresh Memorandum of Understanding (MoU) that is being outlined now.

The banks will also have to collect at least 10 percent of default loans from defaulters other than the top 20.

The top 80 defaulters -- 20 from each bank -- which include both government and private enterprises possess 30 percent of the total default loans of the NCBs.

The NCBs will be asked to cut their operating cost by 5 percent this year.

The chairmen and managing directors of the NCBs Sunday held a meeting with the central bank Governor Dr Fakhruddin Ahmed regarding the MoU and discussed the targets.

The central bank's earlier effort to improve performance of the NCBs by signing MoUs with them achieved mixed results.

The first such MoU was signed in June 2003 outlining specific targets to be achieved by December 2003.

In December last, the NCB default loan stood at Tk 10,575 crore with the top 80 defaulters holding Tk 3,172 crore. But the NCBs could recover only Tk 16.40 crore in cash.

"Because of such poor cash recovery, the new MoU emphasises cash recovery this year," a central bank source said.

The NCBs were to cut their operating cost by 10 percent, according to the last year's MoU. But none of them could do it. Instead, their cost increased by 5.38 percent between 2002 and 2003.

Of them, the operating cost of Sonali Bank rose by 1.93 percent, Janata 8.36 percent, Agrani 6.31 percent and Rupali by 7.6 percent.

In this context, the Bangladesh Bank says that the NCBs will have to cut their cost by reducing transport, electricity and telephone costs where waste is plenty.

However some NCB officials told The Daily Star that this strategy is not realistic. "Cuts in transport, electricity or telephone costs will not lead to 5 percent reduction in operating costs. To really attain this goal, the NCBs may have to cut 2,000 jobs, close some loss-making branches and take other measures," an official said.

The Bangladesh Bank told Agrani Bank authorities that a new private management body will take over the bank in a few weeks. Therefore, the central bank will have a different set of goals for Agrani.

Like the previous one, the new MoU will also limit the growth of loans to a maximum of 5 percent.

The draft MoU will soon be sent to the NCBs for approval by their boards, sources added.