State owned banks floundering: Debt monitoring cells crucial

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Golam Mowla
Published : 04:00, Aug 01, 2018 | Updated : 14:32, Aug 04, 2018

State owned banks floundering: Debt monitoring cells crucialLatest report from the Bangladesh Bank states that the condition of state owned banks is deteriorating with 359 branches of six banks incurring losses.
The report further states that due to the rise in loss making branches, their overall economic indicator is falling.
In Sonali Bank, 183 branches of 1212 branches are loss making; for Rupali Bank, 33 are problematic of 562, 21 of Basic’s 68 and 22 of BDBL’s 40 branches are floundering.
There’s report that some are also eating up their capital though many are given life lines every year with taxpayers’ money.
Last June, Sonali, Rupali and Basic banks were given Tk. 1400 crore to tackle capital deficiency.
Basic Bank was given Tk. 1000 crore, Sonali 300 crore and Rupali 100 crore. In 2011, the number of state owned banks incurring losses was 159, which went up to 493 branches in 2016. The situation improved a little in 2017 and, currently, the number of struggling banks stands at 359.
The central bank identifies state owned commercial banks’ high interest rate on default loan as the main problem. At Basic Bank, the default loan is Tk. 8,594 crore or 59.22 percent, whereas the amount of default loan for Bangladesh Development Banks is Tk. 804 crore or 55.14 percent.
Sonali Bank’s default loan is Tk. 14306 crore, which is 38.73 percent of total loan. Janata Bank’s default loan is Tk. 9702 crore (22.34%), Agrani faces Tk. 5676 crore (19.52%), Rupali has Tk. 4,603 crore as default which is 21.93 percent of total loans.
The report underlined weak loan management and unreliable internal control as the main causes, leading to the dismal condition of state owned banks.
The unsatisfactory recovery of the default loan was also highlighted as a cause.
Former Bangladesh Bank governor, Dr. Salehuddin Ahmed, told Bangla Tribune: “when influential people take loans and do not return it, banks have nothing to do.”
Due to absence of good governance, these banks are facing losses and eating up their capital.
No bank has formulated investigation cell to probe loans from Tk. 100 crore and more, though all banks were told to have such a unit.
On August last year, the central bank gave letters to six state owned banks, facing large defaulted loans to bring loan takers under a debt monitoring system.

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