Banks’ non-performing loans (NPL), also known as classified credits, have increased alarmingly, which implies low base of assets, capital and income of the banks, according to Bangladesh Bank (BB) sources.

Statistics released by the central bank Thursday showed that non-performing loans both in state-run and private banks stood at 10.03 percent of the total outstanding loans of the banks at end of the year 2012.

The amount of classified loans stood at 6.12 percent of bank’s total outstanding loans in December 2011.

Total classified loans of banks stood at Tk 427.25 billion at the end of 2012, up from Tk 226.44 billion during the same period a year ago.

Out of total classified loans, the share of four state-owned banks is Tk 215.15 billion for 2012.

“The increase in NPL is alarming for the banking sector. It implies low base of capital adequacy, weakened banks’ asset and lessen profitability of banks,” a BB official said Saturday.

BB data shows that the recovery of industrial terms loans in the first quarter of the current financial year (FY) was Tk 81.91 billion.

During July-January period of this fiscal, the recovery of farm loans stood at Tk 79.52 billion.

A high official of a private bank, however, claimed that the increase in classified loans was because of the tightened rules enforced by the central bank effective from October 2012.

“The BB has curtailed timeline for rescheduling and provisioning loans which resulted in broadening the amount of non-performing loans,” said the official, seeking anonymity.

A BB official, while replaying to this comment, said the central bank had to go for enforcement of the tightening rules to comply with international standards.

Md Yousuf Ali Hawlader has been elected chairman of Bangladesh Commerce Bank for 2013-2016, the bank said in a statement yesterday.

Hawlader started his career as senior officer with the then Muslim Commercial Bank Ltd in 1966.

He has served as deputy managing director and managing director (current charge) of Sonali Bank.

Hawlader has also been a director of Investment Corporation of Bangladesh Ltd.

The central bank has considerably shored up its precautionary measures to contain fraudulent activities in response to the recent banking scams, its governor said yesterday.

A Bangladesh Bank (BB) study on the scams -- titled Material Loss Review (MLR) -- found that bank managers failed to adhere to simple review methods like know your customer (KYC), credit risk grading (CRG), anti-money laundering provisions, among others.

They also demonstrated major lapses and deficiencies in their credit administration, risk management and internal control and compliance functions.

“As per the recommendations of MLR, BB has considerably tightened its onsite and offsite vigilance on risk management, corporate governance, internal controls and internal audit functions in banks,” said BB Governor Atiur Rahman.

The central bank has also reconstituted the state-owned banks' boards of directors with “fit and proper” persons, he added.

An online electronic supervision dashboard bringing together a range of live transactions data from banks and provide warning signs of potentially fraudulent transactions, has been put in place, too.

“The foreign exchange transactions modules of the supervision dashboard are already operational and in use by BB and the banks,” said Rahman.

He urged the top management to monitor all letters of credit (L/C) transactions by their respective branches so that they can immediately track any suspected fraud and take preventive measures.

The central bank governor advised all banks to open L/Cs (both foreign and local) through SWIFT [Society for Worldwide Interbank Financial Telecommunication] to prevent fraud.

“I hope these disciplines will be adhered to in right earnest and the banks succeed in keeping themselves largely free of insider abuses and frauds.”

Rahman's comments came at an interactive session on international trade fraud, organised by the International Chamber of Commerce, Bangladesh (ICCB) at MCCI in Dhaka yesterday.

“We have arranged this session with the higher-ups of banks and the BB governor to discuss the modalities for detection and prevention of such fraud,” said ICCB President Mahbubur Rahman.

“International trade has been a major driver of growth, and the world today is significantly more dependent on it. But commercial crime is growing faster than international trade. Frauds are more complex and involve larger sums than ever before."

Mamun Rashid, chairman of ICCB's standing committee on banking, techniques and practices, urged all bank executives, specially the trade professionals, to further review the existing trade undertaking, processing and settlement model.

P Mukundan, director and chief of ICC-Commercial Crime Services, said International Maritime Bureau can work closely with BB and commercial banks to develop a system for detection and prevention of fraud.

He urged banks to check the balance sheet and have collateral before opening of any account of its clients as well as for opening of L/Cs.

Bangladesh Bank staff led by governor Atiur Rahman stand in silence for three minutes starting from 4:00pm to express solidarity with Shahbagh protests demanding death penalty to Jamaat-e-Islami leader Abdul Quader Molla and all other war criminals at the central bank headquarters in Dhaka on Tuesday. 

Bangladesh Bank on Tuesday introduced an electronic system for monitoring all kind of transactions involving foreign exchange in the banking sector to check any embezzlement.
BB governor Atiur Rahman inaugurated the electronic system named dashboard at the central bank headquarters in the capital.
Managing directors of a number of scheduled banks attended the programme.
Atiur said from now on the inspection team of the central bank would be able to analyse the data of the dashboard before it made any special visit to a bank.
‘The introduction of the dashboard is a time-befitting measure. It will help us to tackle embezzlement and forgery in the banking sector,’ he said.
He said that the central bank would know all information about export, import, inward and outward remittance instantly from the dashboard.
The monitoring and supervision system of the BB will be strengthened by using the dashboard, he said.
The zonal offices of the central bank will also be able to use the dashboard and officials concerned will get facility from the electronic system before making any inspection to any bank in their respective zone.
‘The BB has set a target of transmitting all reports in the banking sector through online. The newly-introduced dashboard will give a push to the effort,’ he said.
Moreover, scheduled banks will also be able to supervise their own operation under the system as banks will be able to monitor the business situation at their branches through the BB web portal, the BB governor said.
A BB official told New Age that the electronic screens would initially be set up at the offices of BB governor and concerned deputy governor, executive director, general manager and all branch offices of the central bank.
He said, ‘From now on, we are able to know the bank-wise outstanding inland documentary bills and the amount of bills of acceptance to be given by a branch of a bank in a day,’ he said.
Sonali Bank MD and CEO Pradip Kumar Dutta said that not only the central bank but also his bank could get dashboard facilities.
He said, ‘Sonali Bank could have avoided the recent unexpected incident if the electronic system was introduced before it happened.’
A BB investigation revealed that Sonali Bank’s Ruposhi Bangla Hotel branch lent Tk 3,606 crore to Hallmark Group and five other companies between 2010 and May 2012 against fake letters of credit.
The BB official said that the dashboard would make the central bank capable of tackling embezzlements like Hallmark Group-Sonali Bank scam.
He said that the scam had been done through purchasing fake inland documentary bills for back-to-back LC.
BB deputy governor Nazneen Sultana and executive director Md Ahsan Ullah, NCC Bank MD and CEO Mohammed Nurul Amin, Pubali Bank MD and CEO Helal Ahmed Chowdhury and Islami Bank MD and CEO Mohammad Abdul Mannan also addressed the programme.