Karmasangsthan Bank (KB) is now trapped in bad debt after 13 years of its inception.

The total classified loans of the specialised bank, which was set up in 1998 with an aim to create self-employment opportunities by financing small enterprises, has stood so far at Tk 30 crore, the bank’s top official admitted. KB has so far disbursed Tk 1,244.30 crore loans.

“The classified loans are relatively higher in view of the bank’s smaller paid-up capital,” Mushtaque Ahmed, KB’s managing director, told The Independent Meanwhile, Bangladesh Bank’s banking inspection department detected that KB’s classified loans are increasing day by day due to disbursement of credit without CIB report.
The central bank is now in a move to make the Credit Information Bureau report obligatory, prior to disbursement of any loans.

BB said in its probe report that as such CIB report is now not a mandatory one for the KB, it has resulted in poor assessment of loan proposals and turned those into classified loans over the years.
"Non-use of CIB report results in turning the loans into classified. Sometimes, a same borrower is being sanctioned loans by KB who earlier took advances from a bank or another financial institute. There are little chances of return of such loans," according to the latest BB report, now on the table of the governor for his perusal.

A BB official said they will soon have talks with the KB  officials for introducing the CIB report.
Mushtaque, however, said that he did not receive any call from the central bank about holding talks. On the loan recovery, he said, "The current rate of recovery is 93 per cent while the rest 7 per cent turns classified. We need to improve the recovery rate and bring the classified loans at lower level."    The KB MD also noted that his bank is a separate financial institute and the central bank's regulations are not obligatory for it. The number of direct beneficiaries of KB is around 2.26 lakh who have employed over 10 lakh persons across the country, according to KB statistics.
In fiscal year 2009-10, the KB has disbursed Tk 215.48 crore among 30,284 unemployed persons and in FY 2010-11, Tk. 330.21 crore wasc disbursed among 41,844 persons.

The bank under the guidance of the ministry of finance is executing a cluster of credit programmes to assist  entrepreneurs for the development of agro-based industries.

Under the patronage of the ministry of labour and employment, the bank is providing credit facilities without security among the self-retired and or retrenched workers and employees. A special programme for eradication of hazardous child labour in the country has been launched by the KB under the patronage of the ministry of labour and employment. Meanwhile, the bank has provided credit facilities without security to the parents of 5000 child labourers.

Source: The Independent/ Bangladesh/ 29th Nov 2011