BKB, Rakub asked to lessen default loans, raise capital base
Bangladesh Lender yesterday asked two specialised banking institutions to strengthen their financial health by bringing down default loans and boosting capital basic.
Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (Rakub) are also instructed to lessen their large numbers of unprofitable branches by cutting costs.
The banking regulator developed the instructions during a meeting at its headquarters presided above by Governor Fazle Kabir. The chairman and handling directors of both lenders were as well present.
The directives were issued according to a memorandum of understanding (MoU) between your central bank and the state lenders.
The BB sets latest targets for both banks each year and reviews their performance once in every three months beneath the agreement.
The central bank earlier asked BKB to recuperate Tk 101 crore from the most notable 20 defaulters by 2020. It managed to realise Tk 11.36 crore in the first half a year of the year.
The defaulters held 45.47 % of the full total defaulted loans to the tune of Tk 2,733 crore by June, according to central bank info.
Rakub also performed poorly since it realised Tk 3.21 crore in the first half against the gross annual recovery target of Tk 56 crore from the top 20 defaulters.
Up to 17 per cent of the bank's defaulted loans, amounting to Tk 1,756 crore, are now stuck with the most notable delinquent borrowers.
The central bank asked the lenders to take the initiative to recuperate these loans quickly, according to a Bangladesh Bank official, who attended the meeting.
The two loan providers' capital shortfall also worsened between January and June.
The capital shortfall in BKB widened by 12.35 per cent year-on-year to Tk 10,318 crore by June. It rose 96 % to Tk 1,338 crore for Rakub.
The central bank ordered the banks to take enough measures to fortify their capital base by curbing non-performing loans.
Numerous loss-making branches likewise points to their financial health.
However, the quantity of unprofitable branches of BKB slightly transpired to 311 by June as opposed to 330 one year ago. Still, this amount is far too excessive as it has a total of just one 1,038 branches.
The number of unprofitable branches for Rakub jumped 323 per cent year-on-year to 195 in June. This implies 51 % of the lender's 311 branches have fallen right into a loss.
This led the BB to ask both BKB and Rakub to lessen the quantity of loss-incurring branches by carrying out a useful cost-cutting model.
Poor corporate governance is normally the main reason for the deteriorating personal health of both banks. Likewise, the central bank does not have full authority to regulate the lenders as per the lender Companies Act 1991. Hence, the central bank usually does not force the state lenders to follow the MoU goals.
The two lenders are also asked to increase loan disbursements from the stimulus packages to accelerate economic recovery.
