Bangladesh Bank has reduced credit ceiling for two state-owned commercial banks — Sonali and Janata — due to their poor financial health for this year.
The central bank, however, raised the limit for Rupali Bank and kept it unchanged for Agrani Bank. The BB took the move in a bid to curb the rise in the classified loans of the SCBs and to reduce the scope for loan delinquencies in the context of their relatively low level of operational performance, said officials of the central bank.
To this end, the BB issued separate letters to managing directors and chief executive officers of the four banks on March 18 asking them to follow the central bank’s directives.
According to the BB letters, the central bank set credit growth targets for Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank at 6 per cent, 10 per cent, 10 per cent and 12 per cent respectively for 2014 from 8 per cent, 12 per cent, 10 per cent and 10 per cent for 2013.
A BB official told New Age, ‘The central bank have set the limited credit growth targets for the SCBs for 2014 to reduce their high volume of default loans, expedite their loan recovery rate and improve their core risk management operations.’
The BB started to set lower credit ceiling for the state-owned banks since 2013 as the financial health of the banks deteriorated massively in the period due to scams and corruptions.
The central bank unearthed a number of loan scams in the past few years including Hallmark Group, Bismillah Group and S Alam Group loan scams at Sonali and Janata banks and that was one of the key reasons for lowing the credit expansion targets for the two SCBs, a BB official told New Age on Tuesday.
The central bank set the credit ceilings in accordance with the memoranda of understanding signed between the BB and the SCBs.
Under the MoUs, the BB calculates the credit ceiling excluding farm loans, staff loans and government borrowing to be provided by the four banks.
The BB data showed that the four banks but Rupali failed to achieve the credit growth in 2013 set by the BB.
In 2013, Sonali Bank posted a 7-per cent negative credit growth, Janata Bank a 1.15-per cent growth, Agrani Bank a 0.63-per cent
negative growth. Rupali Bank, however, registered a credit growth of 13.98 per cent, surpassing the
ceiling of 10 per cent set by the central bank.
The BB official said the SCBs had adopted cautious policy to disbursing loans in the last year that decreased the credit growth at the three banks.
Besides, the political unrest in the run up to the national elections held on January 5 also created an adverse impact on their credit growth as the majority of businesspeople were reluctant to take banks’ finance in the period, he said.
For this reasons, the operating profit of the banks declined significantly in 2013, he said.
Meanwhile, the BB has recently instructed Rupali Bank to deposit Tk 284 crore in a blocked account as penalty for its failure to maintain the central bank-set ceiling.
The central bank directed Rupali to deposit the amount as the SCB disbursed the amount in excess of the BB ceiling.
Rupali Bank will neither be able to invest the sum anywhere nor receive any interest against the amount.
-With New Age input
