International Monetary Fund is closely watching Bangladesh Bank’s actions in handling the country’s big loan scams in state-run banks, said Bank Division officials.
IMF has asked the central bank to provide more updates on specific steps it has taken regarding the incidents which include three loan forgeries by state-owned Sonali Bank and BASIC Bank involving thousands of crores taka, the sources said.
The lender also wanted to know as to whether the central bank has any plan to sell out the distressed debts arisen from the three scams.
A five-member IMF mission headed by South Asia executive director Rodrigo Cubero will visit Dhaka on September 17-30 to review its fifth tranche of its $1bn credit given to Bangladesh under the Extended Credit Facility (ECF).
For the review, IMF has already sent a questionnaire to the central bank and different ministries asking about various issues. Answers will be sent on September 9.
Also during its fourth review mission last year, the IMF wanted to know what actions were taken against the banking frauds.
IMF also sought information about state-owned commercial and specialised banks’ compliance history with a Memorandum of Understanding signed with the central bank.
According to BB’s financial stability report 2013, the rising stressed assets and a couple of big financial scams in the state banks have been a cause for concern in the banking industry.
Stressed assets, which include gross non-performing assets and restructured advances, stood at 13.5% of the total loans at the end of December 2013, compared with 13.7% a year ago.
One-third (Tk20,360 crore) of the stressed assets are held by five state banks out of the 56 banks in Bangladesh.
Besides, IMF requested for three years information of non-performing loans (NPL) of all state-run commercial and specialised banks.
It also wanted to know about what plans or policies the central bank has taken to deal with the NPL and rescheduled loans for the banks.
A BB investigation in 2012 found that the Hall-Mark Group and some other businesses swindled around Tk3,557 crore from Sonali Bank showing fake documents. Of the amount, Hall-Mark alone embezzled Tk2,626 crore.
“The state banks won’t be able to recover the money from the distressed debt,” Salehuddin Ahmed, a former central bank governor, told Dhaka Tribune.
Distressed debt means a default loan of a borrower who is financially in deep trouble, and the state banks will sell his or her properties to recover the default amount.
Salehuddin Ahmed said as the default loans of the Hall-Mark Group have already become distressed debts, Sonali Bank can recover the amount by selling lands of the group.
“But in a country like Bangladesh, most of the loan defaulters are well connected with the political parties, so it is not so easy for the state banks to sell out the distressed debts,’’ he feared.
