4 SCAM-HIT SCBS BB raises loan disbursement ceiling

Bangladesh Bank has increased the credit ceiling for four scam-hit state-owned commercial banks for 2017 in accordance with the banks’ requirement as they claimed that a lower limit impeded them to enjoy expected profit.
The BB issued separate letters to managing directors and chief executive officers of the four banks in May in this regard asking them to disburse loans in line with the central bank’s directives.
According to the BB letters, the central bank set credit growth targets for Sonali Bank at 14 per cent for 2017 from 10 per cent for 2016, that of Janata Bank at 17 per cent from 12 per cent, that of Agrani Bank at 12 per cent from 10 per cent and that of Rupali Bank at 20 per cent from 17.50 per cent.
A BB official told New Age on Tuesday that the SCBs had recently expressed their dissatisfaction despite BB set an increased credit ceiling for them as their expectations were higher than that of the central bank’s decision.
The central bank may increase the credit ceiling further for the banks for this 
year as it is facing pressure from different corners to do it, he said.
The four banks but Janata were able to maintain their credit ceiling last year in line with the central bank’s directive, he said.
The central bank had earlier taken a decision to freeze Tk 418 crore of Janata Bank kept in its account with the central bank for disbursement of loans beyond limit in 2016 as its credit ceiling grew by 15.19 per cent crossing the central bank’s limit of 12 per cent.
The official said that the higher credit ceiling for the four banks would bring no good for their financial health as they had been lacking corporate governance for long.
‘It is widely established that more credit disbursement in the SCBs means making more defaulted loans’, he said. 
The BB started to set a limited credit ceiling for the state-owned banks since 2013 on the back of surge in defaulted loans in the banks as they sanctioned and disbursed large amount of loans on wholesale basis ignoring the rules and regulation.
The central bank set the credit ceilings in accordance with the memoranda of understanding signed between the BB and the SCBs.
Under the MoUs, the BB calculates the credit ceiling excluding farm loans, staff loans and government borrowing to be provided by the four banks.
But the central bank’s measures failed to contain the upward trend of the non-performing loans in the banks as the board of SCBs disbursed loans thoroughly on political ground, the central banker said.
The BB data showed that the amount of defaulted loans at Sonali Bank increased to Tk 10,628 crore as of December 2016 from Tk 10,299 crore, that of Janata Bank to Tk 6,510 crore from Tk 4,166 crore, that of Agrani Bank to Tk 6,086 crore from Tk 5,878 crore and that of Rupali Bank to Tk 4,139 crore from Tk 2,794 crore. 
The large defaulted loans in the SCBs were mainly responsible for the capital shortfall in the banks and the government continued to allocate a handsome figure to recapitalise them for the last few fiscal budgets, the official said.
The central bank unearthed a number of loan scams in the last few years involving many unscrupulous businesses including Hallmark Group, Bismillah Group, Moon Group, BEXIMCO Group and Mother Textile Ltd with Sonali, Janata, Agrani and Rupali banks and that was one of the key reasons for increasing the defaulted loans, he said. 

 

- See more at: http://www.newagebd.net/article/17216/bb-raises-loan-disbursement-ceiling#sthash.FqE2ydjH.dpuf