State banks fall short of loan recovery targets

State banks last year fell way short of realizing their loan recovery targets despite the central bank's constant pressure.

In 2013, the four banks aimed for cash recovery of Tk 5,379 crore from loan defaulters, but managed only Tk 2,834 crore, which is 52.7 percent of the target, according to data from the central bank.

The recovery from top 20 loan defaulters, however, was better than in previous years: Sonali, Agrani, Janata and Rupali achieved 66 percent of their targets for 2013, whereas in previous years it was less than 12 percent.

Janata and Rupali were the high-achievers, hitting 117 percent and 217 percent of their targets respectively for retrieving bad loans from the top 20 defaulters. In comparison, Sonali and Agrani fared poorly, managing 37 percent and 42

percent of their targets respectively.

As for their recovery target from the other defaulters, the banks managed only 51 percent. Sonali achieved 50 percent of the target, Janata 69 percent, Agrani 40 percent and Rupali 46 percent.

A Janata Bank high official said the recovery of loans would have been higher were it not for the slow and lengthy legal process.

As of December 2013, the number of pending cases was 15,395, involving Tk 17,210 crore, according to the central bank data.

The four banks last year signed performance agreements with the central bank, and the loan recovery targets were made accordingly.

Early this month, Bangladesh Bank evaluated the performance of the four banks in line with the performance agreements and found most of the conditions were not met.

The state banks are not allowed to provide more than 15 percent of capital as credit to a single client borrower, as per the agreements. But, Sonali exceeded the upper limit for one client, Rupali for four and Janata two.

Janata also provided around Tk 50 crore to a government entity, exceeding the limit.

Another condition was that the operating expenses would not be more than 10 percent of previous year's actual spending, but Janata, Agrani and Rupali went slightly over the limit.

The state banks were also supposed to make their loss-making branches profitable, but as of December 2013 some 129 of the branches continue to lose money.

However, the four banks improved their position significantly regarding capital, loan growth and classified loan reduction.

Loan rescheduling and write-offs under BB's relaxed classification rules owing to political turmoil helped the state banks improve their situation in these cases. In 2013, the nationalized banks wrote-off around Tk 4,000 crore in contrast to Tk 1,000 crore a year ago.

News Source:

Daily Star

Date: 27-Mar-2014