Home ›› 31 May 2022 ›› Front
Four state-run banks -Sonali, Janata, Agrani and Rupali - are in dire straits thanks to their high non-performing loans, capital shortfall, lackluster loan recovery, loan concentration and weak management.
The four state-run banks are in the marginal status in the CAMELS rating system of Bangladesh Bank.
The CAMELS is an international rating system used by regulatory authority to rate banks and financial institutions.
The acronym (CAMELS) stands for ‘capital adequacy, asset quality, management, earnings, liquidity and sensitivity’.
The BB marks financial institution or bank as strong if CAMELS rating stands at less than 1.50. The financial institution or bank is marked as satisfactory if its CAMELS rating stands between 1.50 and 2.50 and it is marked as fair if its CAMELS rating stands between 2.50 and 3.50 as per the central bank regulation.
A financial institution or bank is marked as marginal if its CAMELS rating stands between 3.50 and 4.50 and the BB marks it as unsatisfactory if its CAMELS rating stands between 4.50 and 5, said BB the regulation.
At the end of December of last year, Sonali Bank’s CAMELS rating stood at 3.96, Janata Bank’s CAMELS rating stood at 4.23, Agrani Bank’ at 4.18 and Rupali Bank’s at 4.04, said a report of the central bank.
Bangladesh Bank marked Sonali Bank and Agrani Bank as highly risky while Janata Bank and Rupali Bank as critically risky in the comprehensive risk management rating due to their ailing financial indicators.
A high official of the central bank said the four state-run lenders are at high risk now due to their loan irregularities. Of the four state-run lenders, Janata bank is at the highest risk because the bank is concentrated now in a few borrowers, he added seeking anonymity.
Contacted, Janata Bank Chairman S. M Mahfuzur Rahman told The Business Post that the scam and irregularities occurred in the year of 2010 to 2012 leading Janata Bank to this present financial condition.
“We are trying to revive from the ailing situation of the bank,” he added.
The BB report said Sonali Bank’s bad loans stood at Tk11, 959 crore at the end of December last year and Janata Bank’s at Tk12320 crore. Non-performing loans of Agrani Bank stood at Tk9, 987 crore and Rupali Bank’s at Tk6, 666 crore.
The central bank report said the state-run four banks are at risk now due to their credit concentration in top five branches.
At the end of December of last year, Sonali Bank’s total loan stood at Tk6, 9060 crore. Of them, Tk24, 092 crore or 35 per cent loans are concentrated in the top five branches of the bank.
Janata Bank’s total loan stood at Tk69, 966 crore. Of them, Tk50, 812 crore or 73 percent are concentrated in its top five branches. Agrani Bank’s total loan stood at Tk59, 790 crore. Of them, Tk27, 280 crore or 46 per cent concentrated in the top five branches.
Rupali Bank’s total loan stood at Tk38, 083 crore. Of them, Tk22, 415 crore or 59 per cent concentrated in its top five branches, as per BB report.
BB report said the four state-run banks faced net interest loss due to their high interest bearing deposit.
At the end of December last year, Sonali Bank’s interest loss stood at Tk979 crore, Janata Bank’s at Tk82 crore, Agrani Bank’s at Tk762 crore and Rupali Bank’s at Tk334 crore, as per the BB report.
The culture of impunity enjoyed by the defaulters, political interference in approving loans and lack of experience among bankers in dealing with pressing issues weakened the country’s state-run banks, said economists.
Zahid Hussain, former lead economist of the World Bank in Bangladesh, said political interference in approving loans was widespread in state-run banks than private banks.
He said most of the weak state-run companies get favor from state-run banks to take loans but the companies cannot return the loans.
On top of that, the accountability of state-runs banks is weaker than those of private commercial banks, he added.
The government-owned banks cannot avoid blame and responsibility for the soaring loan default as they are approving loans without ‘due diligence’ or ‘considering the repayment capacity of borrowers’, said the economist.
