State-run commercial banks are running with 11.27 percent default loans, double the industry average, although they were corporatised about five years ago to make a turnaround, the central bank said yesterday.

Sonali Bank, the country's largest bank, has the highest percentage of non-performing loans at 17.89 percent or Tk 5,705 crore.

Janata Bank has 10.7 percent bad loans compared to the 6.12 percent industry average.

“The amount of default loans at the state banks is still high despite being corporatised,” said Bangladesh Bank Governor Atiur Rahman.

His comments came at a meeting with the chief executives of Sonali, Janata, Agrani and Rupali banks at the BB headquarters in Dhaka.

The four banks sign memorandum of understanding (MoU) every year with the central bank for developing banking operations including operation costs, availability of capital, realisation of default loans, reduction of loss incurring branches and risk management.

The BB also sets some targets for the banks through the agreement and reviews their achievements in every three months.

Rahman said both the amount and the rate of non-performing loans of all the state banks went down in the last quarter of 2011 compared to the previous quarter.

The bad loan recovery rate is also not satisfactory with the three banks apart from Janata.

Last year, Sonali Bank could recover only 14.82 percent of the target from its top 20 loan-defaulters. Agrani Bank could retrieve 57.03 percent and Rupali Bank only 0.04 percent of the targeted bad loans.

Janata Bank fared well, recovering 91.99 percent of the target.

“The banks have to play more effective roles in recovering the default loans,” said Rahman. “The recovery cell of the banks has to be made more effective in realising the bad loans.”

He said the state banks, however, have been able to maintain 11.68 percent capital adequacy in compliance with Basel-II regulations.

The banks need to hold at least 10 percent capital adequacy.

The governor asked the banks to prepare and submit a comprehensive capital plan in the next two months, as the central bank is going ahead with implementing Basel-III.

Rahman said the banks' implementation of the core risk management guideline has been at a marginal or fair level in most cases, which has to be improved to a satisfactory level.

He categorically said the central bank would not tolerate any breach of the regulator's prudential regulations.

He also asked the banks to be more cautious about their asset liability management.

News: The Daily Star/ Bangladesh/ 23-April-2012