BB warns new banks over aggressive banking

Posted by BankInfo on Mon, Apr 06 2015 03:18 pm

Bangladesh Bank on Sunday warned six new banks due to their aggressive banking as advance-deposit ratio of some banks increased abnormally in the recent months. The BB asked the banks not to go for aggressive banking as some new banks are not maintaining adequate mortgage against their disbursed loans which may put an adverse impact on their financial health. The directives came from a meeting between the BB and the six new banks at the central bank headquarters in the capital. Central bank governor Atiur Rahman presided over the meeting while managing directors of the six banks were present. The six banks are: The Farmers Bank, Midland Bank, Modhumoti Bank, South Bangla Agriculture and Commerce Bank, Meghna Bank and Union Bank. The central bank at the meeting expressed concern over the aggressive lending by the new banks in the recent months despite a dull business scenario caused by political unrest, a BB official told New Age on Sunday. He said the advance-deposit ratio of the new banks was yet to cross the lime, but it might cross shortly if they did not take cautionary measures in this regard. The BB data showed that as of February 26, 2015, the ADR stood at 74.50 per cent in South Bangla Agriculture and Commerce Bank, 78.88 per cent in Meghna Bank, 83.67 per cent in, 84.13 per cent in The Farmers Bank, 78.84 per cent in Union Bank and 53.96 per cent in Modhumoti Bank. As per the BB rules, the conventional banks are allowed to disburse maximum 85 per cent loan against their deposit position while the ratio for the Islamic banks are 90 per cent. The BB warned the banks as most of them are close to the highest level ADR ratio, the central bank official said. The central bank has asked the banks not to plunge under capital shortfall as aggressive banking fuels up the risk to face defaulted loans, the BB official said. The BB criticised the new banks due to their excessive expenses for their interior decorations asking them to avoid unnecessary expenditures. Some of the new banks have already set up huge number of branches although they failed to expand their expected business, the official said. Some banks did not follow the recruitment policy in line with the central bank’s directives which put a negative impact on their good governance, he said. The BB asked the banks to prepare recruitment policy before initiating fresh recruitment. Meghna Bank managing director Nurul Amin told reporters after the meeting that the central bank asked the new banks not to go for aggressive banking in a bid to maintain a sound banking operation. The BB has asked the banks to maintain their financial indicators accurately, he said. Amin said, ‘The BB may arrange one-to-one meeting with the banks which fail to maintain their indicators.’ The central bank issued licences to nine banks including three NRB banks in 2012 despite facing huge criticisms from different corners, he said. A good number of ruling party-backed politicians and businesspeople got the licences to operate the banking business, said the BB official. Experts and economists had expressed their concern at that time over the issuing fresh licences to the new banks as they thought that the initiative would create major indiscipline in the financial sector.

News:New Age/6-Apr-2015
Posted in Banking, News

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