Most new banks in the country are involved in loan concentration and aggressive lending that leads to default risk of the banks.
Bangladesh Bank has strictly warned those banks not to lend aggressively at a meeting held with the chief executive officers of some new banks yesterday at the central bank headquarters.
Bangladesh Bank Governor Atiur Rahman expressed annoyance over the loan activities of the banks while presiding over the meeting.
The governor also strongly criticised the malpractice of unsolicited interventions in loan activities by the banks’ chairmen.
“New banks have been warned of aggressive lending and asked to be careful about financial health of the banks,” said Meghna Bank Managing Director Nurul Amin who attended the meeting.
Some nine new banks concentrated their loans to the same groups which are already burdened with loans by the existing banks, according to the meeting source.
The banks were found mostly interested in providing large loans and two of them have provided large loans up to 52% and 53% of their total loans and advances.
The two are Midland and South Bangla Agriculture and Commerce Bank.
Though the banks were allowed to lend large loans up to 56% of their total loans they were also warned for rapid growth of loans which might exceed the limit soon, said a senior executive of Bangladesh Bank.
The Advance Deposit Ratio (ADR) of Midland bank stood at 83.67% in February.
The bank lent around Tk350 crore of its total loan of over Tk690 crore to the large borrowers, according to the Bangladesh Bank data.
The credit growth of the bank rose by over 200% over the past one year.
The ADR of South Bangla Agriculture and Commerce Bank stood at 74.5% in February. Of the total loans of Tk1,437 crore, the bank lent around Tk760 crore to the large borrowers.
The credit growth of the bank rose by around 240% in last one year.
The large loan ceiling of other new banks, however, remained at the average level of 40%.
The Farmers bank is also an aggressive lender among the new banks, and political heavyweights mostly dominate the bank.
The ADR of the bank stood at 101.72% in mid-October last year, crossing the authorised ratio of 85%.
Though the ratio came down to 84% in February this year following the warning of Bangladesh Bank, the ratio is still the highest among the new banks.