The operational performance of four state-owned commercial banks (SoCBs) in some key areas will largely be influenced by the credit growth programmes that have been set for them by the Bangladesh Bank (BB) for the current calendar year (CY).
"The BB has lowered such targets for the SoCBs mainly to curb the growth of their classified loans and to reduce the scope for loan delinquencies in the context of their relatively low level of operational performance in some core functional areas," a central banker, who is well-informed about the state of affairs of the SoCBs, said.
"Some major indicators of the SoCBs have reached a critical level and those are yet to show signs of any noteworthy improvement. Their volume of classified loans is increasing while their loan recovery position and core risk management are under strains," he observed.
"We have lowered the credit growth targets for the SoCBs for 2013 to reduce their high volume of default loans, expedite their loan recovery rate and improve their core risk management operations," he added.
In letters sent to the chief executive officers (CEOs) of the SoCBs a few days before the presentation of the budget for fiscal year (FY) 2013-14 to parliament, the BB set the credit growth targets for Sonali Bank Limited, Janata Bank Limited, Agrani Bank Limited and Rupali Bank Limited at 8.0 per cent, 12 per cent, 10 per cent and 10 per cent respectively.
The credit growth target for the SoCBs in 2012 was 15 per cent. But the performance of Sonali and Agrani has been lower than their respective annual target. Both the banks achieved 6.37 per cent and 9.93 per cent against their respective annual credit growth target.
However, credit disbursements by Janata and Rupali exceeded the target by 15.75 per cent and 18.89 per cent respectively.
Giving reasons for lowering the credit growth target of SoCBs, sources concerned said the four such banks disbursed disproportionately higher levels of loans to different clients relative to the latter's collaterals, without complying properly with related rules and procedures.
The central bank's investigations in past several months into last year's loan scams including those of the Hallmark Group, Bismillah Group and other ones was one of the reasons for lowing the credit expansion target of SoCBs, a high official of the BB hunted.
The inspection team of the central bank continued to examine the loan portfolios of different banks. In this background, the banks chose to go slow and adopted a cautious approach to lending to new clients, leading to a declining rate of the credit growth of the banks, especially the SoCBs, sources said.
Classified loans with the four SoBs rose by Tk 28.88 billion in the first three months of the current CY. The aggregate amount of classified loans in the country's banking sector stood at Tk 244.03 billion on March 31 last against Tk 215.14 billion on December 31 last, sources said.
Meanwhile, three SoCBs -- Sonali, Janata and Agrani -- are yet to finalise their annual financial statements for 2012, even after the expiry of the first six months of the succeeding calendar year. Usually, such annual statements are submitted by banks within three months after the end of the related calendar year.
Despite the availability of ample liquidity in the banking system, the commercial banks are not in a position to expand their credit activities due to the low demand for credit from the real entrepreneurs who are not the usual delinquent types, in the private sector. That has slowed down the credit growth in the last couple of months, banking sources told the FE.
Augmention of credit disbursements, they said, will be a challenging task for the overall banking sector, if the existing situation in areas of supplies of infrastructural facilities like those of power and gas and a potentially restive polity in an election year, does not show the possibilities of an early turnaround.
The rate of growth in credit flow to the private sector witnessed a falling trend during the last 10 consecutive months (July-April). It stood now at 12.7 per cent.
Earlier, the loan-deposit ratio (LDR) in the overall banking sector declined to 72 per cent in April last against 85 per cent a year back, the BB data showed.