Kazi Zahidul Hasan :
A number of commercial banks engaged in reckless lending practices last year invited danger to the whole banking sector.
They disbursed credit to corporate groups and business firms violating their advance to deposit ratio (ADR) rules.
According to banking rules, all the commercial banks including Islami Banks can disburse loans up to 85 percent and 90 percent of their deposit if the demand for loans remains high and financial indicators of the banks are in good shape.
A Bangladesh Bank (BB) reports show, 16 banks took an ‘aggressive’ lending policy last year and disbursed loan violating the ADR rules during the period.
Of them, 13 are general category commercial banks and three are Islamic banks whose credit-deposit ratio (CDR) crossed more than 85 and 90 percent.
These banks are: Farmers Bank, Premier Bank, NRB Commercial Bank, National Bank, Standard Bank, AB Bank, Meghna Bank, NRB Global Bank, City Bank, IFIC Bank, Trust Bank, Shahjalal Islami Bank, BASIC Bank and Islamic Banking windows of Agrani Bank, Jamuna Bank and Premier Bank.
BB report shows, troubled-hit Farmers Bank maintained the highest ADR of 105.24 percent followed by BASIC Bank 100 percent, Premier Bank 90.82 percent and NBR Commercial Bank 90.14 percent.
BB, however, asked the banks to bring down the ADR to permissible level by March 2018. “The central bank issued warning to the banks which violated ADR rules. If any bank fails to bring down the ratio by the deadline, punitive action will be taken against the bank,” Debashish Chakraborty, an executive director and spokesperson for BB told The New Nation.
He said BB came up with the move to ensure stability of the banking sector.
Chakraborty said the banks went into aggressive lending to make high profits overnight.
“These banks disbursed credit beyond their permissible level due to high credit demands. They lent money to the business firms considering interest of the economy as well as employment generation,” Chairman of the Bangladesh Association of Banks (BAB) Md Nazrul Islam Mazumder told The New Nation.
Refuting the claim of BAB Chairman, former BB Deputy Governor Dr Khandaker Ibrahim Khaled said, commercial banks disbursed loans at higher amount than the approved limit putting the whole banking sector as well as depositors at risk.
“The aggressive lending activities of banks raised concern for all of us for sustainability of the banking sector,” he added.
Management of the banks is responsible for the aggressive banking, which creates bad loans and liquidity crisis, he said demanding restoring quick discipline in banking sector.
