Three state-owned commercial banks — Sonali, Janata and Rupali — applied to Bangladesh Bank to increase their credit ceiling considering the banks’ financial health, said officials of the central bank.
According to BB data, the central bank earlier set credit growth targets for Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank at 6 per cent, 10 per cent, 10 per cent and 12 per cent respectively for 2014 from 8 per cent, 12 per cent, 10 per cent and 10 per cent for 2013.
Against the central bank move, the board of directors of the three SCBs, except Agrani Bank, applied to the BB last week to increase their credit ceiling for 2014.
The Sonali Bank board requested the central bank to increase its credit ceiling to 10 per cent from the BB’s ceiling of 6 per cent and Janata Bank to 12 per cent from the ceiling of 10 per cent, a BB official told New Age.
The board of Rupali Bank, however, did not mention its expected credit ceiling, but the bank requested the central bank to reset the ceiling on the basis of its reasonable business background, he said.
According to Rupali Bank application, the bank appealed to BB to increase the credit growth in accordance with its deposit collection from the clients.
Sonali and Janata requested the central bank to reset their credit ceiling on the basis of their large business profile and financial health.
The three banks said that credit disbursement was one of the major indicators for any bank to earn operating profit.
The central bank may deny the proposals of the three banks to increase their credit ceiling although it is yet to take decision formally in this regard, the BB official said.
Another BB official said that the central bank had set the limited credit growth targets for the SCBs for 2014 to reduce their high volume of default loans, expedite their loan recovery rate and improve their core risk management operations.
The BB started to set lower credit ceiling for the state-owned banks since 2013 as the financial health of the banks deteriorated massively in the period due to scams and corruptions.
The central bank unearthed a number of loan scams in the past few years including Hallmark Group, Bismillah Group and S Alam Group loan scams at Sonali and Janata banks and that was one of the key reasons for lowing the credit expansion targets for the two SCBs, he said.
The central bank set the credit ceilings in accordance with the memoranda of understanding signed between the BB and the SCBs.
Under the MoUs, the BB calculates the credit ceiling excluding farm loans, staff loans and government borrowing to be provided by the four banks.
The BB data showed that the four banks except Rupali failed to achieve the credit growth in 2013 set by the BB.
In 2013, Sonali Bank posted a 7-per cent negative credit growth, Janata Bank a 1.15-per cent growth and Agrani Bank a 0.63-per cent negative growth.
Rupali Bank, however, registered a credit growth of 13.98 per cent, surpassing the ceiling of 10 per cent set by the central bank.
The BB official said the SCBs had adopted cautious policy to disburse loans in last year that decreased the credit growth at the three banks.
Besides, political unrest in the run up to the national elections held on January 5 also created an adverse impact on their credit growth as the majority of businesspeople were reluctant to take bank finance in the period, he said.