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Asset-management Company will relieve banks of overdue loans |
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January 30, 2001
Dhaka-- (UNB)- The Bangladesh Bank Governor yesterday requested the Finance Minister to allow formation of asset-management company, either in public or private sector, to relieve the banks of long-drawn burden of overdue loans. “Such a company could be the best alternative to bring a permanent solution to capital inadequacies and provision shortfalls in banks,” Dr Mohammad Farashuddin said. He sought the permission while taking stock of an anomalous lending scenario at the annual conference of Agrani Bank regional and corporate managers. Finance Minister Shah AMS Kibria and Finance Secretary Dr Akbar Ali Khan also attended the function, third in a series of such meets after Rupali and Sonali banks, at Hotel Purbani. Classified loans must be deducted from the balance sheets of the banks and transferred or sold to the planned asset-management company, Dr Farashuddin suggested. Malaysia has achieved success in this practice and Indonesia, the Philippines and Pakistan are also reaping good results, he pointed out. The central bank governor identified capital inadequacies the weakest side of the banks, which often hide the fact from the annual report and opt for projecting operational profits. “Banks will never be able to march forward until and unless they arrest this weakness,” he said. Dr Farashuddin appreciated the professional attitude of the staff of Agrani Bank that rendered better services to clients compared to other nationalised commercial banks. He observed banks are now ‘almost’ free from political interference. Agrani Bank Chairman Abdul Hannan chaired the function also addressed by Additional Secretary (banking) Dr Shoeb Ahmed and the Bank’s Managing Director, MA Yusuf. The Finance Minister maintained the same tune he had in the annual conferences of Rupali and Sonali banks, while expressing anguish against the culture of interest waiving and banks’ reluctance in legal course against bad borrowers who even defaulted trade loans in connivance with corrupt bank officials. Even up to Tk 20 crore was forgiven in a single case, he cited as an anomaly, terming interest waiver a ‘cancer’ in the banking system like the loan default culture. There must be some grounds when one senses corruption in such forgiveness at the cost of genuine borrowers who repay loans regularly with due interest, the minister commented. “If not, why criminal suits are not being proceeded against the defaulters of trade loans? How the goods mortgaged with banks against trade loans vanished?” He referred to a loan case in Chittagong where the lawyer employed by the concerned bank did not turn up in court even for once in 11 dates. But no step was taken against the lawyer or the branch manager. The Finance Minister also charged the bank management with paying more attention to the delinquent borrowers than the honest ones, “because you get much facilities and flattery from the defaulters.” He advised the Agrani Bank and other NCBs to take more vigorous drives for their agriculture credit operations, instead of halfhearted and eyewash approach. “You had better withdraw agriculture credits than to do something ineffectively,” he said, referring to complaints of negligence he received from farmers against the NCBs’ farm-loan operations. The Finance Minister, while rebuking the bank officials for their failings, also held out assurances of restructuring their incentive packages and rewarding them a pay scale separate from government wage scale. He lauded the Agrani Bank for its appreciable success in increasing both deposits and investments as well as bringing the rate of classified loans below 30 per cent. Deposits in Agrani Bank shot up 15 per cent while loans and advances increased 20 per cent. Classified loans reduced to Tk 3004 crore or 29 per cent of its total credits and advances. The gross average of classified credits in banks is 32 per cent. Finance Minister Kibria suggested the Bank to categorize its classified loans to identify how much of it is trade finance, how much is long-term loan and how much went to the public-sector enterprises. Such an analysis will help the Bank revise its recovery drives and identify the old loans that have no chances to be recovered. |