State banks' default loans continue to soar

Default loans of state banks, especially BASIC and Sonali, continue to swell in spite of the performance contracts and restructuring of big loans.

Between September 30 and December 31 last year, BASIC Bank's defaults rose 54 percent. The bank had Tk 6,392 crore of bad loans during the period, which was 50 percent of its total outstanding loans.

The loan situation of Sonali Bank did not improve much either.

At the end of December 2015, the bank's default loans stood at Tk 8,100 crore in contrast to Tk 7,918 crore three months earlier.

The situation of Agrani and Janata has improved though.

Khondkar Ibrahim Khaled, a former central bank deputy governor, said if loans are given with a proper professional attitude, it is unlikely to become bad.

In the last several years, banks sanctioned some loans through corrupt practices, as a result of which the loans of state banks are not being recovered, he said.

If the banks' influential people, especially the chairmen and the managing directors, are dishonest or weak, it is difficult to improve the condition of the banks, he added.

Early this month, Finance Minister AMA Muhith, at the annual conference of Janata Bank, said it will take a long time to recover from the losses inflicted by Sonali's and BASIC's reckless business practices.

A big robbery and a scam took place at Sonali and looting in the hands of high-level officials at BASIC Bank, Muhith said.

“We will have to work hard to heal the wounds these two banks have inflicted upon us. It shouldn't be correct to say that we have fully recovered -- it will take awhile to recover from the losses.”

Banking Division Secretary M Aslam Alam said the government has been taking steps to improve the condition of state banks.  Last year, for the first time performance contracts were signed with the banks.

As it was the first time, last year's targets were softer. But this year, harder targets will be set.

A reform to the banks' governance has already started and efficient persons have been appointed to the bank boards.