4 state-run banks asked to reduce NPLs to 10%

The Bangladesh Bank (BB) has asked state-owned Sonali, Janata, Agrani and Rupali banks to set an action plan for reducing the non-performing loans (NPLs) to 10 per cent to meet the condition of the International Monetary Fund (IMF).

The central bank’s instruction on Tuesday came at a Memorandum of Understanding (MoU) meeting held at the BB headquarters with the four banks to discuss their financial health.

BB Governor Abdur Rouf Talukder presided over the meeting attended by BB Deputy Governor Kazi Sayedur Rahman, Executive Director Md Nurul Amin and other related central bank officials, and the managing directors and CEOs of the four state-run banks.

The central bank also asked the four banks to reduce the capital shortfall, boost loan recovery and reduce their large loan concentration.

BB officials said that the governor asked these banks to diversify their loans as the central bank has noticed that a huge amount of loans have been disbursed by the banks through small branches.

The government last year had promised IMF that it will cut down NPLs of state-run banks to 10 per cent and private commercial banks to 5 per cent by 2026.

This promise helped Bangladesh secure $4.7 billion in loans from IMF.

NPLs in the country’s banking sector hit a record Tk 1,20,656 crore at the end of December last year mainly due to the partial withdrawal of the relaxed loans repayment facility.

The bad loans rose by Tk 17,383 crore last year, with NPLs standing at Tk 1,03,273.78 crore at the end of December 2021, according to BB data.

BB has had an MoU with the four state-run banks since 2007 to improve their financial conditions.

Under the MoU, the central bank sets targets on various issues, including loan recovery from defaulters, maintenance of credit growth, reduction of losses and management expenses, and risk management for the banks.

These goals are evaluated at meetings with the banks every six months.