Four state-run banks asked to reduce NPLs

The Bangladesh Bank has asked state-owned Sonali, Janata, Agrani and Rupali banks to reduce their high amount of non-performing loans (NPLs), reduce loss-making branches, and boost loan recovery and loan diversification efforts.

The central bank instruction came at a review meeting held on Monday with the public sector banks to discuss the latters’ financial health.

Bangladesh Bank Governor Fazle Kabir presided over the meeting attended by the BB Deputy Governor Kazi Sayedur Rahman, Executive Director Mohammad Ahmed Ali and other central bank officials concerned.

The managing directors and chief financial officers (CFOs) of all four state-owned banks took part in the meeting.

The central bank asked the banks to boost recovery, reduce NPLs, cut the number of loss-making branches and also gave instruction to improve the lenders’ financial health, said the central bank Executive Director and Spokesperson Md Serajul Islam.

“This was a regular meeting. Every year the Bangladesh Bank sets a target to improve the financial health of the four banks,” according to Serajul.

The spokesperson said the governor asked those banks to diversify their loans as the BB noticed that a huge amount of loans have been disbursed through small branches by the lenders.

Contacted, Agrani Bank Managing Director Mohammad Shams-Ul Islam told The Business Post the central bank instructed them to boost loan recovery and increase loan disbursement from the stimulus packages.

As of June 30 this year, the four state-run banks’ default loan amount stood at Tk 35,221.07 crore as per the latest data from the Bangladesh Bank.

The four banks’ financial indicators were not satisfactory as the lenders default loans remained high, with some of them having both provision and capital shortfall, said another BB official, who was present in the meeting.

As of June 30, Agrani Bank faced a Tk1960-crore capital shortfall, Janata Bank Tk 345 crore, Rupali Bank Tk 665 crore and Sonali Bank Tk 3,558 crore, as per the BB data.

The Bangladesh Bank has had a Memorandum of Understanding (MoU) with the banks since 2007 to improve their financial conditions.

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

Every six months, these goals are evaluated at the meetings with the banks.