The six banks are Agrani Bank, Bangladesh Development Bank, BASIC Bank, Janata Bank, Rupali Bank and Sonali Bank. Together, the six institutions account for about Tk148,000cr, or roughly one-fourth of the country’s total defaulted loans
The Finance Ministry has issued a set of directives to six state-owned banks to improve loan recovery, strengthen asset quality, increase deposits and improve their capital positions amid a growing burden of non-performing loans.
The directives were issued at a recent meeting between senior executives of the six banks and officials of the Financial Institutions Division (FID) under the Ministry of Finance. The six banks are Agrani Bank, Bangladesh Development Bank, BASIC Bank, Janata Bank, Rupali Bank and Sonali Bank. Together, the six institutions account for about Tk148,000 crore, or roughly one-fourth of the country’s total defaulted loans, according to the report. Among them, Janata Bank has the highest amount of defaulted loans at Tk75,396 crore, followed by Agrani Bank with Tk29,029 crore, Rupali Bank with Tk19,281 crore and Sonali Bank with Tk15,048 crore.
BASIC Bank has around Tk8,131 crore in defaulted loans, while Bangladesh Development Bank has approximately Tk889 crore.
Against this backdrop, the Financial Institutions Division has instructed the banks to increase cash recovery from defaulted borrowers, assess the quality of their loan portfolios, raise deposits and improve their overall capital positions.
The banks have also been instructed to prepare a list of their top 20 loan defaulters and formulate action plans covering a period of 12 to 24 months to address their financial weaknesses.
The directives come as high levels of non-performing loans continue to put pressure on the financial health of several state-owned banks.
The government is also considering providing capital support to banks facing significant capital and provisioning shortfalls, if necessary.
However, such support would be conditional on the banks improving loan recovery, reducing their deficits and moving towards profitability.
The government is expected to focus particularly on recovery from major defaulters, including through legal action and enforcement against collateral, as part of the effort to improve the financial condition of the banks.
The issue of whether the authorities can take effective action against major defaulters and ensure stronger internal governance has nevertheless emerged as a key concern.
Former Bangladesh Institute of Bank Management (BIBM) Director General Dr Toufiq Ahmad Choudhury said a lack of political commitment was one of the major obstacles to resolving the problems facing the banking sector.
He argued that if the government had sufficient commitment to restructuring troubled banks, their problems could be addressed within a relatively short period.
According to him, banks could potentially be turned around within six months to one year if the authorities took decisive measures. The latest directives also place emphasis on improving the quality of lending rather than focusing solely on recovering existing defaulted loans.
Improving the quality of new lending would be important to prevent the accumulation of additional bad loans and strengthen the long-term financial position of the state-owned banks.
Experts have also stressed the need to ensure accountability alongside any government support for banks. The authorities are therefore expected to monitor implementation of the recovery plans and assess whether the banks are meeting their targets for loan recovery, deposit mobilisation, capital improvement and profitability.
The measures reflect growing government concern over the financial condition of state-owned banks and their role in the country’s wider banking-sector reform efforts.
