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Finance minister: No more recapitalization of SOBs

  • Published at 10:46 pm August 25th, 2019
AHM Mustafa Kamal
File photo of Finance Minister AHM Mustafa Kamal Courtesy

The current budget earmarked Tk 1,500 crore against recapitalisation of public sector banks

The government would no more recapitalize the state-owned commercial banks (SCBs), Finance Minister AHM Mustafa Kamal said on Sunday.

In a note of warning, he exhorted SCBs to earn money, make profit out of investment, pay taxes and then draw salaries. 

He said the government deployed highly skilled professionals and reputed bankers on the boards and managements of SCBs as part of the latest restructuring last week aiming to achieve the goals. 

At a briefing following a meeting with chairmen and CEOs of four SCBs — Sonali, Agrani, Rupali and Janata, he said he asked the newly deployed chairmen of board of directors and chief executive officers (CEOs) of SCBs to submit separate 'Work Plan' by the next seven days with regard to improving their respective operation.

"Banks will not get any refinancing (recapitalizing) from now on. This is final. Earlier, banks enjoyed refinancing (recapitalizing) every year to cover losses. No more refinancing. This is over," Mustafa Kamal told reporters at a briefing held at NEC auditorium in the planning ministry.

In the last 10 years since 2010, the government injected Tk17,521 crore in all the SCBs. The highest Tk4,477 crore was injected in 2014 after scamsters took away a huge amount from SCBs in a series of credit approvals, especially from Sonali, Rupali, Janata, Basic and Agrani Banks.

The current budget earmarked Tk 1,500 crore against recapitalisation of public sector banks.

The finance minister said he would sit again with chairmen and CEOs of state-banks on the second Sunday of coming month (September 8) after receiving the 'Work Plans' from SCBs to review their financial status and work out the next course of actions.

"NPL at banks won't reduce right now"

At the briefing, the finance minister admitted that there was no possibility of non-performing loans (NPL) at banks going down right now as the Bangladesh Bank (BB) initiative of rescheduling failed to attract loan defaulters.  

In order to reduce the NPL in compliance with the government directive, the BB had issued a circular on April 25 this year to open a controversial rescheduling facility for loan defaulters at 2% down-payment and 10 years for full payback with the first two-year moratorium facility. 

Following a writ petition, the High Court (HC) stayed the BB circular for two months.  

Meanwhile, the BB's June-end quarter's statement shows that the NPL in banks rose by Tk1,551 crore to Tk112,425crore. At the end of March 2019, total NPL was Tk110,874crore. 

At his first media exposure in January this year after being sworn in as finance minister, Mustafa Kamal had vowed that banks' NPL would not rise by a single taka (one unit of money).

"I had an 'Exit Plan' which I made by endorsing in 'finance bill' the extension of special rescheduling facility for loan defaulters. But, it did not succeed. So, NPL would not reduce right now," he defended his stance.      

He said NPLs involved lakhs of businesses.

"Exit plan (special rescheduling facility) was not successful. It will be contempt of court, as it is a sub judies matter, (if I made any comments). I hope the court will settle this issue soon," he said.

He said another circular would be issued giving out another three-month facility for businesses with defaulted loans. He said rate of interest would also be specified in the circular.

"We will soon settle this issue. There will be no rise in NPLs in the coming days. You will be see that businesses will be saved," he reassured.

Asked about the still increasing NPLs in banks, the minister made a dramatic reversal contradicting his previous statement by saying that he would not accept that defaulted loans had increased. 

"The defaulted loan did not increase. I will not accept if you say this," he said.