The central bank yesterday asked four state-run commercial banks to strengthen their audit function to bolster internal control and compliance.
Such measures will help the banks give a boost to the corporate governance as well.
The Bangladesh Bank came up with the instruction at a meeting with four state-owned banks – Sonali, Janata, Agrani and Rupali – at the central bank headquarters in the capital. BB Governor Fazle Kabir chaired the meeting, while the top executives of the four banks and senior officials of the central bank were present.
The meeting was organised as part of the memorandum of understanding between the BB and the lenders. It is usually organised once in every three months as part of an effort to strengthen the ailing financial health of the state lenders.
The audit division has a big role to play to ensure the sound health of banks and it also protects them from financial corruption.
The banks have been facing a wide range of financial irregularities that have pushed their defaulted loans up and caused the capital shortfall to widen.
Officials of the state lenders assured the banking regulator of complying with the instruction and appointing more staff to fortify the audit division in the quickest possible time, said an official of a state bank, who took part in the meeting.
A central banker said the banks had also been asked to strengthen the default loan recovery process.
The BB asked them to concentrate more on recovering non-performing loans (NPLs) rather than going after the top 20 defaulters.
Recovering NPLs from the top 20 defaulters is highly difficult, so the lenders should give the equal importance to realise delinquent loans from all defaulters, the central banker said, quoting the governor.
Default loans at the four banks stood at Tk 34,609.60 crore, which is 36 per cent of the outstanding NPLs of Tk 96,117 crore in the banking sector as of June this year.
The four banks were ordered to speed up the SME loan disbursement under the central bank's stimulus package as their performance is not good given the overall lending scenario.
The central bank also instructed them to give efforts to fortify their capital base as they have been facing the capital shortfall for long. Three out of the four banks faced a large amount of capital shortfall at the end of the second quarter.
Capital shortfall at Janata Bank stood at Tk 3,569 crore, Agrani at Tk 2,195 crore and Rupali at Tk 159.23 crore. Sonali Bank, however, managed a capital surplus of Tk 3.35 crore as of June.