State banks allowed to lend more

Bangladesh Bank has given the go-ahead to four state banks to disburse more loans this year in the wake of shrinking lending activities of private commercial banks.

The credit ceiling of Sonali, Janata, Agrani and Rupali was enhanced in the latest meeting that the banking watchdog organises once every three months to review the performance of public banks.

The largest of the four, Sonali, saw the ceiling increase to 17 percent for 2018, up from 14 percent set for last year.

The bank sat on huge deposits due to slow lending after the Hallmark loan scam.

The bank's credit growth was only 8 percent in 2017, far below the ceiling set in a memorandum of understanding signed between BB and the state banks.

Sonali's credit-deposit ratio was the lowest—35 percent—in December last year, which improved to 40 percent in April this year, according to central bank data.

Bangladesh Bank suggested the bank go for moderate lending to meet up the loan demand in the market, said a senior executive of the regulator.

Sonali's total deposit stood at Tk 1 lakh crore as of April this year against Tk 43,338 crore in the loan book.

Agrani and Rupali were allowed to let their ceilings hit 20 percent this year, which is much higher than the industry average for private credit growth of 18 percent last year.

Agrani's limit was increased—which was 17 percent last year—as the bank is investing in three power projects of the government. The bank's loan-deposit ratio was 55.48 percent as of April this year.

The bank plans to give more focus on SME lending, said Mohammad Shams-Ul Islam, managing director of Agrani Bank. He said the credit ceiling was increased as the state banks' loan-deposit ratio was very low last year.

Rupali is lending to some new business groups, said a senior executive of the bank.

The bank has been involved in moderate lending activities since last year when its credit growth hit 19 percent against the ceiling of 20 percent. The ceiling was kept unchanged for this year.

The loan-deposit ratio of the bank was 61.30 percent as of April, according to central bank data.

The ceiling was kept unchanged for Janata at 17 percent for 2018.

Janata wanted a higher ceiling, but the central bank did not pay heed to the call as the bank has been going through a lot of trouble due to irregularities in lending, said a senior executive of Bangladesh Bank.

The bank went for aggressive lending last year and handed over more funds in loans exceeding the limit set by the regulator. As of April, the loan-deposit ratio of the bank was the highest—69.52 percent—among the four banks.