SOBS PERFORMANCE Deals with govt only in paper

The much-hyped annual agreements aimed at improving performance of scam-hit state-owned commercial banks have remained mere paper works, with poor recovery of rising defaulted loan.
Officials have said Financial Institutions Division has been giving more than a dozen of targets to Sonali, Janata, Rupali and BASIC banks every year since the annual performance agreement system was introduced in 2015-2016.
Recovering defaulted loans, reducing loss-making branches, making higher profit and increasing savings are among the 15 targets, they say, adding that the banks have already been given the targets for the new fiscal 2018-19, this time without a formal ceremony.
Experts find no major improvements in the overall performance of the state-owned commercial banks, which they attribute to absence of effective monitoring of the agreement, particularly in recovering the defaulted loans.
Former Bangladesh Bank deputy governor Ibrahim Khaled told New Age on Saturday that although the targets looked good, the agreements were ineffective mainly for lack of monitoring.
Besides, many loans given on political consideration in the current and previous tenures of the present government became sour and thus fattened the size of defaulted loan.
According to the annual publication of Financial Institutions Division released in June, the defaulted loan of BASIC Bank, once a profitable one, has grown to Tk 8380.9 crore until this March from Tk 7,598.9 crore in December 2017.
The amount was Tk 7300.6 crore in December 2016 despite receiving bailout funds of Tk 3,390 crore in four tranches from the government to meet the bank’s capital shortfall caused by shady loans of over Tk 6,000 crore given during the tenure of its previous board, led by its chairman Sheikh Abdul Hye Bacchu between 2009 and 2014.
The defaulted loan of Sonali, which failed to recover a single penny of Tk 3,500 crore gulped by little known Hallmark Group in 2013, hit Tk 11,000 crore until this March while the amount was Tk 10,911 in January 2017.
Janata, facing loan scam of over Tk 5,000 crore extended to little known AnonTex Group, has been burdened with defaulted loan of Tk 7,441 crore until March, which was Tk 5,819 crore in December 2017. 
Because of poor recovery of the bad loans, the amount of defaulted loans in the state-owned banks stood at Tk 55,095 crore in January this year which was Tk 41399.70 until March 2017, revealed finance minister AMA Muhith in parliament on April 13. 
Asked if the annual performance agreements were ineffective, Financial Institutions Division secretary Eunusur Rahman answered in the negative.
He said the annual performance agreements made the bankers aware of the situation.
He hoped that it would take at least two more years for the agreements to yield positive impacts.
Eunusur, however, admitted that the government was facing a lot of criticism because of the growing bad loan in the state-owned banks.
Former caretaker government adviser Mirza Azizul Islam said growing defaulted loan eroded people’s confidence in banking system, squeezed banks’ income, pushed up interest rate and led to aggressive lending to undeserving borrowers.
The adverse impacts were already visible with the government struggling to make the bankers agree to reduce the lending below the double digit mark, he said.
Bangladesh Bank has been signing memorandum of understanding every year with the state-owned banks much before the introduction of the annual performance agreements.
But the BB’s MoUs with the state-owned commercial banks faced criticism amid degradation of the banking sector that according to local think-tank Centre for Policy Dialogue and economists could be addressed with the formation of a commission.
But the government has ruled out establishment of the commission.

News Courtesy: www.newagebd.net