• Monday, Dec 09, 2019
  • Last Update : 02:33 pm

State banks warned of freestyle banking

  • Published at 05:41 pm September 11th, 2013

The government has warned the managements and executives of the state-owned commercial banks not to go for freestyle banking any more as they already provided large amount of loans without properly assessing the wealth quality of the clients.

It also asked them to strictly follow the rules and regulations as well as standards in providing loans, according to the minutes of a recent meeting at the finance ministry held in the wake of rising credit scams.

The Banking and Financial Institutions Division convened the meeting with the chairmen and CEOs of the state-owned commercial and specialised banks with Finance Minister AMA Muhith in the chair.

Muhith expressed dissatisfaction at the meeting as good governance and transparency has not been established yet at the banks due to lack of automation. He said services to the clients cannot be ensured without automation and, as a result, the banks fall behind the private ones in competition.

Bangladesh Bank Governor Atiur Rahman said there is lack of good governance in the state banking sector. Management of the banks are not monitoring the loan accounts, resulting in increased rate of non-performing loans.

He stressed on improving the standard of management information system and external audit system of the banks. Core banking solution should be executed with emphasis on controlling the management, he added.

The meeting issued six directives to the banks, including immediately sending their respective capital shortfall position to the banking division and a work plan for immediate automation of the six commercial banks.

The banks have also been asked to establish core banking solution, comply with the revised bank company law and improve the performance indicators for banks.

The state-owned banks’ capital shortfall surged by 357% in the last six months due to a sharp rise in their classified loans, resulted mainly from credit scams.

According to Bangladesh Bank statistics, the banks had a capital shortfall of about Tk91bn on June 30, a big jump from about Tk20bn on December 31 last year.