State banks far away from targets
The Bangladesh Bank yesterday ordered four state banks to speed up cash recovery from defaulters as their record in realising delinquent loans has remained dismal.
In addition, the central bank asked them to take prompt measures to bolster the capital base since they have been facing a capital shortfall for a long time.
The four state-run lenders – Sonali, Janata, Agrani and Rupali – were also asked to invest their excess liquidity to make a profit.
The BB gave the instructions at a quarterly meeting as part of its memoranda of understanding with the four banks. Governor Fazle Kabir presided over the meeting at the central bank headquarters, where the managing directors of the lenders were present.
The central bank had set a loan recovery target of Tk 1,610 crore from the top defaulters of the banks for 2021. But they got back only Tk 53.38 crore as of June.
Similarly, the banks recovered Tk 320 crore from other defaulters in contrast to an annual target of Tk 1,700 crore, according to data from the central bank.
Non-performing loans (NPLs) at the lenders stood at Tk 43,836 crore, which accounted for 45 per cent of the total bad loans in the banking industry in Bangladesh.
The BB asked the banks to beef up efforts to recover the delinquent loans as their performance has so far been dismal to this end, said three central bankers.
Md Abdus Salam Azad, managing director of Janata Bank, said the central bank had instructed them to recover NPLs by initiating effective drive.
BB has instructed us to speed up cash recovery from defaulters and lend to good borrowers.
The banking regulator also asked the banks to avoid seeking regulatory forbearance related to keeping required provisioning against the NPLs and unclassified loans.
Regulatory forbearance is when the regulator refrains from exercising its right to put an insolvent bank out of business.
Mohammad Shams-Ul Islam, managing director of Agrani Bank, said the high NPL ratio of the state lenders had been inherited.
"But, we are giving our best to recover the bad loans."
The central bank ordered the four banks to narrow the large capital shortfall. The lenders had a collective capital shortfall of Tk 20,777 crore as of June.
The banks were also instructed to explore avenues, including the issuance of bonds, to raise capital. The excess liquidity has put the lenders in trouble in recent months due to a lack of investments.
The central bank had instructed them to speed up the loan disbursement following corporate governance.
The excess fund at the banks stood at Tk 102,177 crore, which is 44 per cent of the surplus liquidity in the banking sector.
"Deposits are on the rise. Against the backdrop, the central bank has asked us to invest the funds," Azad said.
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