The Banking Division has instructed the government-owned banks and financial institutions to remain cautious about the acquisition of bad loans as such practice has created fund problems in the public financial institutions.

At a meeting with the Managing Directors and Chief Executive Officers of all the state owned commercial and specialised banks last month, the Banking Division of the ministry of finance also directed the entities to reduce their capital deficit, risky assets and classified loans as well as stabilise their credit and deposit rates.

The meet was hold to evaluate the performance of the institutions on the basis of six indicators.

The Banking Division directed the government banks to be careful about the acquisition of other banks’ loans at a time when a state-owned commercial bank has immersed in huge financial problem for this particular reason, banking division secretary Shafiqur Rahman Pathwary told daily sun last week.

Pointing out the name of the bank, he said Janata will overcome the financial problem by realising its defaulted loans.

He said public banks will reduce their borrowing from the call money market, as government has reduced its borrowing from the banking systems.

In the meet, public banks have also been instructed to accumulate necessary amount of funds to maintain international banking standards by implementing Basel-II, official sources said.

The meeting gave 14 directives to the state owned commercial banks and financial institutions -- Sonali , Agrani , Janata, Rupali , Bangladesh Krishi Bank(BKB), Basic Bank, Bangladesh Development Bank, and Investment Corporation of Bangladesh (ICB).

One of the directives asked the management of the public banks to be careful about the foreign trips by their MDs and CEOs and also to inform the banking division prior to such visits.

As per the latest report, the capital shortage of Janata Bank stood at Tk 2.11 billion, Agarni Bank Tk 1.81 billion, BKB Tk 47.47 billion BASIC Bank Tk 376.9 million till October 30, 2011.

The central bank statistics show that at the end of November last year, classified loan of BDBL accounted 27 per cent of its total loan, while the rate was 22 per cent for Rupali Bank, 23 per cent for BKB and 19 per cent for ICB.

According to statistics, in October 2011, Sonali had a risk–based asset worth Tk 326.90 billion, while that for Janata was of Tk 312.26 billion, Rupali Tk 111.78 billion, BASIC Bank Tk 63.11 billion, BDBL Tk 34.94 billion and ICB Tk 41.73 billion.

As per the directive, the state-owned commerce banks and financial institutions should set up subsidiary companies on an emergency basis with taking prior approval from BB, the Securities and Exchange Commission and the Banking Division.

If they fail to set up such subsidiary companies, concerned banks and financial institution should explain the causes to the Banking Division.

The government enterprises should deposit a total of 75 per cent of their fund to state-owned commercial banks, said the directive.

The Board of Directors of public banks should inform important matters of the banks to the government representatives appointed in the board.

Public banks should arrange third party meetings regularly to solve their audit objections and replace the inactive government-appointed lawyers for the Artha Rin Adalat (money loan court) with fresh recruitments, said the directive.

The Banking Division should also be informed before public banks negotiate or sign deals with other ministries, divisions or the central bank, the directive said.

Bangladesh Bank (BB) official sources, however, said the Banking Division has intensified it monitoring on public banks and financial institutions through the directives though such authority is vested in central bank. Government banks were made public commercial banks in recent years to hold the supremacy of BB on them, said the sources.

BB officials also said matters which were earlier monitored by the central bank would now be supervised by the Banking Division, which they think was not sound for the sector.

The Daily Sun/Bangladesh/ 22th Jan 2012