State-controlled banks have been performing badly for a protracted amount of time now, but recent reports of the financial indicators of four particular state-owned banks showing a mounting trend of accruing non-performing loans (NPL), that too for the last three quarters in succession, should be evidence enough for the administration to either consider the banks’ privatisation or prompt shutdown.
The state-owned Sonali Bank, Rupali Bank, Janata Bank, and Agrani Bank witnessed drastic rises in default loan rates, which badly affected each bank’s Capital Adequacy Ratio – a percentage of a bank’s risk weighted credit exposures – with some of them having very little to show for in terms of cash recovery as well.
Around a quarter of all loans issued out by state-owned commercial banks are classified as NPLs, while state-run banks are even worse being at nearly a third. This continuing disregard for profitability shown by state-run and owned banks suggests that the sector may well have crossed the limits of being considered salvageable.
Making matters worse is of course the unremitting flouting of rules regarding prudent lending on the part of the boards of directors of several state-run banks, a discovery made earlier by Bangladesh Bank.
State banks are unrelentingly proving themselves to be bad investments. It is time the government made a call into either having their existing assets be absorbed into their private counterparts, or having state-owned banks be closed down for good.
