Badrul Ahsan :
The Central Bank warned 20 state-owned and private sector banks of existential crisis, due to their poor performance in terms of loan recovery, sources said.
Bangladesh Bank (BB) has recently cautioned the banks that the entities might face existential crisis unless effective measures are taken to recover their defaulted and written-off loans.
The banks were also asked to put special emphasis on recovering classified loan and introduction of rewards for better-performed employees and taking steps for speedy disposal of the cases pending with different courts for loan recovery.
The boards of directors of the said banks were asked to discuss their loan recovery status in every meeting, the sources informed.
“Overall bank position including income or profit, depends on its loan recovery, but the status of loan recovery is very poor comparing with other banks,” S.K. Sur Chowdhury, Deputy Governor told The New Nation.
Poor loan recovery raises defaulted loans, while the defaulted loans require increased provisioning and subsequently reduces profitability, he said.
Considering the facts, the poor classified loan recovery of a bank ultimately leads the entity’s existence at risk, the senior central banker added.
The Central Bank selected 20 banks considering their poor loan recovery performance between September 2015 and June 2016. The BB data showed that Janata Bank recovered only Tk 50.33 crore against its defaulted and written-off loans between July and September of 2016, Rupali Bank Tk 19.74 crore, BKB Tk 111.23 crore, RAKUB Tk 43.05 crore, AB Bank Tk 4.80 crore, DBBL Tk 3.42 crore, NCCBL Tk 11.01 crore, Jamuna Bank Tk 9.08 crore, Premier Bank Tk 8.88 crore, EXIM Bank Tk 29.75 crore, Farmers Bank Tk 6.84 crore, City Bank Tk 66.13 crore, Al Arafah Bank Tk 57.56 crore, Uttara Bank Tk 34.42 crore, Bank Asia Tk 56.97 crore, SBI Tk 0.05 crore, Woori Bank Tk 0.03 crore, ICB Islamic Bank Tk 3.58 crore, CBC Tk 2.36 crore and BCBL Tk 1.05 crore.
A BB official said that the country’s banking sector had recently faced a number of loan scams which increased the amount of defaulted loans in the banking industry.
The Central Bank will set a roadmap for the banks to recover their defaulted and written-off loans, Sur Chowdhury said.
However, the defaulted loans increased to Tk 62,172 crore as of December 31, 2016 from Tk 51,371.22 crore as of December 2015 in the country’s banking sector, the BB data showed.
The defaulted loans and the written-off loans comprised together Tk 1,04,846 crore as of last December 2016.
The banks wrote off loans amounting to Tk 42,674.04 crore as of September 30, 2016.
Banks are allowed to write off loans when those turn into defaulted loans – falling into bad loans or loss category.
Banks have to file lawsuits with Artha Rin Adalat against the defaulters and have to keep a 100-per cent provision, before writing off the loans.
Banks erase such loans to show a lower portfolio of unpaid loans on their respective financial balance sheets, but the practice is harmful for the banks’ health, another BB official told The New Nation preferring not to be named.
The Central Bank warned 20 state-owned and private sector banks of existential crisis, due to their poor performance in terms of loan recovery, sources said.
Bangladesh Bank (BB) has recently cautioned the banks that the entities might face existential crisis unless effective measures are taken to recover their defaulted and written-off loans.
The banks were also asked to put special emphasis on recovering classified loan and introduction of rewards for better-performed employees and taking steps for speedy disposal of the cases pending with different courts for loan recovery.
The boards of directors of the said banks were asked to discuss their loan recovery status in every meeting, the sources informed.
“Overall bank position including income or profit, depends on its loan recovery, but the status of loan recovery is very poor comparing with other banks,” S.K. Sur Chowdhury, Deputy Governor told The New Nation.
Poor loan recovery raises defaulted loans, while the defaulted loans require increased provisioning and subsequently reduces profitability, he said.
Considering the facts, the poor classified loan recovery of a bank ultimately leads the entity’s existence at risk, the senior central banker added.
The Central Bank selected 20 banks considering their poor loan recovery performance between September 2015 and June 2016. The BB data showed that Janata Bank recovered only Tk 50.33 crore against its defaulted and written-off loans between July and September of 2016, Rupali Bank Tk 19.74 crore, BKB Tk 111.23 crore, RAKUB Tk 43.05 crore, AB Bank Tk 4.80 crore, DBBL Tk 3.42 crore, NCCBL Tk 11.01 crore, Jamuna Bank Tk 9.08 crore, Premier Bank Tk 8.88 crore, EXIM Bank Tk 29.75 crore, Farmers Bank Tk 6.84 crore, City Bank Tk 66.13 crore, Al Arafah Bank Tk 57.56 crore, Uttara Bank Tk 34.42 crore, Bank Asia Tk 56.97 crore, SBI Tk 0.05 crore, Woori Bank Tk 0.03 crore, ICB Islamic Bank Tk 3.58 crore, CBC Tk 2.36 crore and BCBL Tk 1.05 crore.
A BB official said that the country’s banking sector had recently faced a number of loan scams which increased the amount of defaulted loans in the banking industry.
The Central Bank will set a roadmap for the banks to recover their defaulted and written-off loans, Sur Chowdhury said.
However, the defaulted loans increased to Tk 62,172 crore as of December 31, 2016 from Tk 51,371.22 crore as of December 2015 in the country’s banking sector, the BB data showed.
The defaulted loans and the written-off loans comprised together Tk 1,04,846 crore as of last December 2016.
The banks wrote off loans amounting to Tk 42,674.04 crore as of September 30, 2016.
Banks are allowed to write off loans when those turn into defaulted loans – falling into bad loans or loss category.
Banks have to file lawsuits with Artha Rin Adalat against the defaulters and have to keep a 100-per cent provision, before writing off the loans.
Banks erase such loans to show a lower portfolio of unpaid loans on their respective financial balance sheets, but the practice is harmful for the banks’ health, another BB official told The New Nation preferring not to be named.
