The number of loss-making branches of the four state-owned commercial banks increased by 145.73 per cent in the first three months of 2014 due to surge in the defaulted loans at the banks and decreased credit demand from the private sector, Bangladesh Bank officials said.
According to the latest BB data, the number of loss-making branches of the four banks — Sonali, Janata, Agrani and Rupali — stood at 317 as of March 31, 2014 from 129 as of December 31, 2013.
The number of loss-making branches of the banks was 235 as of September 30, 2013.
A BB official told New Age on Sunday that financial anomalies had affected severely the profitability of the banks by increasing defaulted loans at the banks.
The loss-incurring branches had to keep significant amount of provisions against their defaulted loans, resulting in that their operating profits turned into net losses, he said.
The number of loss-incurring branches of Sonali Bank increased to 54 from 47, that of Janata Bank to 110 from 43, that of Agrani Bank to 109 from 27 and that of Rupali Bank to 44 from 12.
The BB official said that the four banks had not showed their defaulted loan properly in the last quarter of 2013 to gain more operating profit that had declined the number of their loss-making branches in the period.
The four banks had to maintain lower provision in the last three months of 2013 against defaulted loans resulting in that they posted a robust amount of operating profit in the period, he said.
The BB official said the central bank repeatedly asked the SCBs in the quarterly meetings with them to reduce the number of their loss-making branches.
‘But, the number increased abnormally in the first quarter of this year as the banks did not take necessary measures in recovering defaulted loans,’ he said.
The defaulted loans at the banks have recently increased as they disbursed significant amount of loans to clients considering their political affiliation, he said.
The BB unearthed a number of financial scams at the four banks in which high officials and board members of the banks were involved, he said.
The number of loss-making branches of the SCBs will not decrease if the internal control system of the banks is not strengthened in the months to come, the official said.
The central bank will set directions to reduce the loss-making branches in the next memorandum of understanding meeting with the SCBs. The MoU meeting is scheduled to be held at the second week of August.
According to the BB data, the defaulted loans at Sonali Bank increased to Tk 10,432.43 crore as of March 31, 2014 from Tk 9,629.23 crore as of December 31, 2013, that of Janata Bank to Tk 3,343.48 crore from Tk 2,605.26 crore, that of Agrani Bank to Tk 3,324.46 crore from Tk 3,317.84 crore and that of Rupali Bank to Tk 1,588.56 crore from Tk 1,053.91 crore.
Another BB official said that a decreased credit growth in the banks was another reason for the upward trend in the number of loss-making branches of the four banks.
The year-on-year credit growth in Sonali Bank stood at -0.24 per cent in the first quarter of 2014, 1.63 per cent in Janata Bank, -1.39 per cent in Agrani Bank and 5.53 per cent in Rupali Bank.
Due to the lowered loan disbursement, the surplus liquidity in the SCBs increased significantly in the recent months, the central banker said.
Loan disbursement is a key component for any bank to earn profit, but the surplus liquidity amid dull business has reduced the SCBs’ profitability, he added.
-With New Age input
