The Bangladesh Bank (BB) has proposed a string of measures to the Ministry of Finance (MoF) to shore up the troubled state-owned commercial banks (SCBs).

Putting an end to the practice of sanctioning loans under pressure from powerful quarters and stopping the purchase of loans of questionable quality from private commercial banks (PCBs) -- are two major steps suggested by BB to help four SCBs to strengthen their financial base and overcome their image problem, a central banker said.

"Our suggestions to MoF to revive the status and image of four SCBs need special attention of the finance ministry officials as directives from them to senior bankers of state-owned banks matter most," a top BB official told the FE on Wednesday.

He said the BB is also serious about enforcing the measures, submitted to the ministry, in all four SCBs -- Sonali, Janata, Agrani and Rupali.

The proposals of central bank said the SCBs must bring an end to all fraudulent activities involving the sanctioning and disbursement of loans.

The BB in its proposals said the SCBs have to comply with the directives of BB on managing their loan portfolios and asset quality to avert any debacle in the future. The banks under no circumstances should exceed the approved limit of large non-funded loan and they must secure approval from their chief executive officers in the process of sanctioning large amount of non-funded loan. The banks also should undertake special drive to recover their huge classified loans, BB proposals said.

Furthermore, the proposals said without meeting the credit risk grading and due diligence no new loan should be sanctioned. Besides, the SCBs should fully comply with the conditions set in the Memorandum of Understanding (MoU) signed with the BB and initiate special audit of its all branches, if needed.

The BB officials said the major problems lie with SCBs in granting loans being influenced by powerful quarters of the government ignoring the basic fundamentals and requirements in lending criteria.

"In many cases, we have to entertain requests or orders from top policy makers of the government in sanctioning bank loans to undeserving entities or individuals," a general manager of an SCBs told the FE.

"We are threatened with dire consequences like termination or transfer from powerful quarters in case we express inability to sanction loan or refuse to provide any unethical loan rescheduling facility," he added.

News: The Daily Financial Express/Bangladesh/15-Nov-12