Bangladesh Bank has appointed observers in four state-owned banks-Sonali, Janata, Agrani and Rupali.
The decision was made by the central bank Governor Atiur Rahman and a letter has already been sent to each of banks in this regard.
The central bank has appointed observers to enhance supervision on the state-owned banks, said SK Sur Chowdhury, deputy governor of Bangladesh Bank.
He said the banks could not comply with the MoU conditions and lacks of good governance, which prompted central bank to appoint observers.
Bangladesh Bank Executive Director Mohammad Naushad Ali Chowdhury has been appointed as observer at Sonali Bank, Ahmed Jamal at Janata Bank, Nirmal Chandra Bhakta at Agrani Bank and Abdur Rahim at Rupali Bank.
Bangladesh Bank had earlier warned the boards of the state-owned banks of appointing observers if they failed to comply with MoU conditions.
The warning came at a meeting held on August 9 with the chairmen and managing directors of the four state-owned banks including Sonali, Agrani, Rupali and Janata.
Currently, only BASIC Bank, among the state-owned banks, has an observer appointed by the central bank.
A presentation was made over the financial performance of the four state-owned banks at that meeting.
The presentation has identified four major loopholes in the banking sector, which include poor cash recovery, lack of internal compliance, automation and good governance.
The meeting also focused on the non-performing loans and capital shortfall of the banks.
The chairmen and managing directors of the banks were asked to enhance their income by strengthening their loan monitoring to stop capital eroding.
However, the banks not only failed to improve their financial health but also their default loan rate and CAMELS ratings also deteriorated further against the strict BB warning.
