Four state-owned commercial banks have signed revised memorandums of understanding with the Bangladesh Bank in a bid to improve their financial health through mitigating the risks of fraud, said officials of the central bank. A BB official said that the SCBs had submitted the revised MoUs to the BB on September 30 after they were signed by the respective bank’s chief executive officers and chairman of the board of directors.
The four SCBs are – Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank.
The central bank proposed to the banks that they should sign the revised MoUs prescribed by the International Monetary Fund.
The IMF included a condition to revise the MoUs between the BB and the SCBs when the country’s government signed with the lender agency to get $1 billion loan from its (IMF) extended credit facility.
Under the revised MoUs, the SCBs will have to introduce credit policy and credit risk management guidelines by November 30 with a view to ensuring credit discipline in the banking sector, he said.
The revised MoUs have come into effect on October 1, he said.
‘Asset quality, liquidity position, credit growth, efficiency of the management, and internal control and compliance has been considered as pivotal areas of the revised MoUs,’ the official said.
The central bank has asked the SCBs to introduce revised human resources development and internal control and compliance polices by December 31 this year as per the revised MoUs.
The four banks have been asked to formulae a management information system by March, 2014 and they will have to implement it within the next two years.
The BB official said the central bank had prepared the revised MoUs in line with the findings of the diagnostic exam report on the four SCBs.
The BB has been signing the MoUs with the SCBs every year since 2003.
In the old MoUs, the central bank used to set an annual target to recover the defaulted loan to decrease their loss-making branches.
Besides, the BB set an annual target of operational expenses for the banks.
The BB holds meetings with the SCBs on one-to-one basis every three months when the central bank reviews the bank’s development.
The BB official said that the central bank’s move had virtually failed as the SCBs had recently been found involved in a number of scams.
Under the circumstances, the capital shortfall of the four SCBs stood at Tk 9062.97 crore as of June 30 against a minimum required capital of Tk 10,339.84 crore.
The BB official casted doubt on the success of the revised MoUs that had been prescribed by the IMF.
A number of the BB reports have found that the board members of the SCBs had been involved in the scams at the four banks, he said.
‘The board members of the SCBs are appointed by the government. For this reason, it is too difficult to establish sound corporate governance in the four banks,’ he said.
-With New Age input
