DhakaTribune
Tuesday December 19, 2017 02:35 AM

Govt for stricter performance criteria for state-run banks

Govt for stricter performance criteria for state-run banks

Defaults in loans issued by the country’s state-owned banks account for 27% of the total in the banking sector

The government is considering punitive actions against officials of eight state-run banks for dispensing bad loans to little known clients, the Bank and Financial Institutions Division has said.

The authorities concerned are also contemplating the idea of revealing the names of top loan defaulters in newspaper advertisements to check an upward trend in defaulting.

The recommendations form part of a new set of conditions to be imposed on the state-run banks as fresh performance criteria.

They will be discussed in a meeting at the Finance Division auditorium in Dhaka today of the Bank and Financial Institutions Division and the managing directors of eight state-owned banks.

The state-run institutions are: Sonali Bank Ltd, Janata Bank Ltd, Rupali Bank Ltd, Bangladesh Development Bank Ltd, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh House Building Finance Corporation, and Investment Corporation of Bangladesh.

In September this year, participants at a conference organised by the Bank and Financial Institutions Division demanded to know why the managing directors of the state-run banks – who draw monthly salaries of Tk4 lakh on average – had not yet taken any stern action against loan defaulters.

Defaults in loans issued by the country’s state-owned banks account for 27% of the total in the banking sector.

A total of 24 recommendations to reduce this ratio were selected from suggestions proposed during a Bank and Financial Institutions Division workshop held two months ago at the CIRDAP auditorium in Dhaka, which was attended by Finance Minister AMA Muhith.

Bank and Financial Institutions Secretary Md Eunusur Rahman told the Dhaka Tribune that the government had been trying to incorporate all of the major recommendations from the workshop, titled “How to Meet the Challenges of State-Run Banks”.

“We have selected some recommendations that may be put into effect in a bid to resolve the problems that plague the state-run banks,” he said. “Moreover, the technological capacity in remote branches of state-run banks will be enhanced to facilitate their smooth operation.”

Not all of the measures tabled are punitive, however: one would reward borrowers who pay off their debts regularly; while another would offer incentives to officials who approve good loans.

Another recommendation suggests separate debt monitoring of large loan defaulters – who have borrowed more than Tk100 crore from state-run banks – by the Bangladesh Bank’s debt monitoring system.

Another recommendation states that no case should be filed if at least 50% of a loan can be recovered through negotiation.

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