[🇧🇩] Banking System in Bangladesh

[Saif]

BASIC Bank officials ‘terrified’ by impending merger

As a state-run bank, BASIC Bank's officers and employees enjoy and job security alongside various employee benefits -- including salaries, provident fund facilities, gratuity, retirement allowance -- which may differ from those offered at City Bank.

www.thedailystar.net

BASIC Bank officials 'terrified' by impending merger

Officials and employees of state-run BASIC Bank are concerned about their future in the face of an impending merger, they said in a memorandum sent to the Bangladesh Bank governor yesterday.

The employees of the bank submitted the memorandum to the governor's office on Tuesday.

However, Bangladesh Bank governor Abdur Rouf Talukder is now in the US to attend the spring meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG).

About a week earlier, they submitted a separate memorandum in this regard to the finance minister as the scam-hit lender is likely to merge with City Bank, a private commercial bank.

In the memorandum, the officials and employees of BASIC Bank said they are 'terrified' over the merger news and, to avoid uncertainty, urged for a merger with a government bank instead.

As a state-run bank, BASIC Bank's officers and employees enjoy and job security alongside various employee benefits -- including salaries, provident fund facilities, gratuity, retirement allowance -- which may differ from those offered at City Bank.

Once a well-run state bank, BASIC descended into a hotbed of irregularities after Sheikh Abdul Hye Bacchu was made its chairman in 2009 on political considerations.

On April 8, City Bank agreed to take over BASIC Bank following a meeting between the Bangladesh Bank governor and the managing director and chairman of City Bank.

Bangladesh Bank executive director and spokesperson Md Mezbaul Haque yesterday told journalists that the merger of weak banks with strong ones is a long process requiring several steps before finalisation.

He also informed that the merger process can be cancelled at any stage, in which case both banks will continue operations as usual.

Responding to a query, Haque said although BASIC is government-owned, it is unlike any other state-run bank.

Other state-run banks were formed through the Banks' Nationalization Order but BASIC Bank was not formed the same way, which is why there will be no difficulties in merging it with a private commercial bank, he added.

BB APPOINTS AUDITOR FOR PADMA BANK, EXIM BANK

As part of their merger, Bangladesh Bank has appointed an audit firm to examine Padma Bank and EXIM Bank and find out the actual financial health of these banks.

The audit firm, Rahman-Rahman Huq, was appointed by the central bank recently as a part of the merger plan, Haque said.

He also said the audit firm was instructed to submit its report to the central bank within a fixed period.

EXIM Bank and Padma Bank signed a memorandum of understanding on March 18 to initiate the merger process in the presence of the central bank governor.

Till now, the central bank has received five merger proposals.

These include state-run Sonali Bank's acquisition of Bangladesh Development Bank Ltd and Bangladesh Krishi Bank's takeover of Rajshahi Krishi Unnayan Bank.

Additionally, City Bank, a private commercial lender, wants to acquire state-run BASIC Bank, while another private lender, United Commercial Bank Limited, plans to buy National Bank.

"We will work on the five proposals at this moment. We will receive more proposals after completing the five proposed mergers," Haque said recently.​

 

[Saif]

Basic, National Bank Mergers: People withdrawing money in panic

A recent rush to withdraw money from the BASIC Bank and National Bank is worsening the situation the troubled institutions are facing.

www.thedailystar.net

Basic, National Bank Mergers: People withdrawing money in panic

A recent rush to withdraw money from the BASIC Bank and National Bank is worsening the situation the troubled institutions are facing.

Depositors flocked to branches of the two banks last week following reports that BASIC Bank would soon merge with City Bank and National Bank with UCBL.

On April 18, the management of the state-run BASIC Bank wrote to the Financial Institution Division of the finance ministry, asking for advice on how to cope with the situation.

Officials said almost Tk 2,000 crore was withdrawn from the bank in a couple of days last week.

In June last year, deposits stood at Tk 15,935 crore at BASIC Bank. The amount has now come down to around Tk 12,000 crore, according to data from the bank.

In another letter sent to the finance ministry last week, the bank's management said it wanted the institution to merge with another state-run entity instead of a private one.

Contacted, Abu Md Mofazzal, acting managing director of BASIC Bank, said different government entities chose his bank to deposit money because it was a state-run institution.

The government bodies are now withdrawing their funds because the bank is merging with City Bank, which is private, he said.

Managers of BASIC Bank branches are receiving many phone calls from institutions that want to withdraw their money, Mofazzal said.

"This will ultimately be the government's loss," he said.

In 2014, a central bank investigation found BASIC Bank Chairman Sheikh Abdul Hye Bacchu's involvement in embezzlement of Tk 4,500 crore. This ultimately diminished the bank's financial health from which it is yet to recover.

As of December last year, the bank's bad loans stood at Tk 8,204 crore, which is 64 percent of its total disbursed loans.

On April 16, the officials and employees of the bank submitted a memorandum to the Bangladesh Bank governor, saying that they were worried about their future after hearing about the merger proposal.

National Bank is also struggling to keep up with the horde of clients waiting to withdraw their money.

Amid reports of financial irregularities, Bangladesh Bank in December last year reconstituted National Bank's board of directors.

National Bank Managing Director Touhidul Alam Khan said the sudden rush for withdrawal was a tremendous pressure for the firm.

"We are visiting our branches to talk to depositors and request them not to withdraw their money," he said.

From January to September last year, the bank lost Tk 1,123 crore. In 2022, it lost Tk 357 crore.

The bank's bad loans stood at Tk 12,368 crore which was 28.92 percent of its total disbursed loans, shows BB data.

According to industry insiders, Bangladesh Bank's recent decision to merge different banks has sent a wave of fear among depositors, stakeholders, bankers, and directors.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said, "Both the weak and strong banks are likely to face the rush to withdraw deposits. But the central bank and the government must ensure that depositors do not lose their money."

However, Mashrur Arefin, managing director of the City Bank, said people often do not like changes.

There should not be much to worry about if the central bank and the government financially support writing-off impaired assets and operating loss of the weak bank, he said.

He said that if the merger of the two balance-sheets takes place after restructuring of the weak bank, then all fears are unnecessary.​

 

[Saif]

In need of prudent bank merger strategy

Bangladesh Bank has recently unveiled a roadmap for banking sector reform. The roadmap aims at ensuring good governance, maintaining public confidence and eventually promoting stability in the financial sector. The comprehensive plan targets seventeen key issues to resolve, of which eleven are for

thefinancialexpress.com.bd

In need of prudent bank merger strategy
NIRANJAN CHANDRA DEBNATH
Published :
Apr 20, 2024 21:35
Updated :
Apr 20, 2024 21:35

Bangladesh Bank has recently unveiled a roadmap for banking sector reform. The roadmap aims at ensuring good governance, maintaining public confidence and eventually promoting stability in the financial sector. The comprehensive plan targets seventeen key issues to resolve, of which eleven are for recovery of defaulted loans and six for ensuring good governance. Five of the issues are considered specifically significant. They are: (i) reduction of defaulted loans, (ii) prevention of anonymous loans and fraudulent activities, (iii) appointment of competent directors, (iv) appointment of independent directors and (v) consolidation of weak banks through merger. To identify weak banks, Bangladesh Bank has issued a framework known as PCA (prompt Corrective Action). As per the PCA framework banks will be categorised into four groups on the basis of four indicators like Capital Adequacy, Common Equity tier-1capital, Net NPL and Corporate Governance. Besides, the Banking Companies (amendment) Act-2023 added a new section 77(A) giving power to the Bangladesh Bank to merge banks compulsorily.

Failure of a bank leaves diverse impacts and may become too costly for the banking sector and the overall economy of a country. Besides, in democracies, along with economic and social impacts bank failure may have huge political impacts. So, to prevent failure of banks, the regulator and the government around the globe sometimes decide for liquidation or force merger of banks.

The banking sector reform roadmap in its priority has kept merging of weak banks first voluntarily and then forcibly, if required. Bank merger is a common phenomenon and widely used tool for consolidation of bank companies around the globe. Sometimes banks voluntarily agree to merge for attaining synergies, economics of scope and scale, diversification, tax savings and even to survive. The regulatory bodies or the government also direct some banks for merger in view of greater national interest. Besides, sometimes bank merger becomes inevitable when it is too late to identify the decay of a bank or financial institution timely or to cope with national and international financial crisis. Every year a good number of banks are merged in different countries around the globe, some mergers take place voluntarily and some forcibly. During the Asian financial crisis of 1997 many banks and financial institutions of different South Asian countries like Japan, Malaysia, Indonesia, Thailand, Sri Lanka and Pakistan and during American financial crisis in 2008, America merged many of its banks. Even in recent years India merged a good number of banks to ensure stability of the banking sector. In Bangladesh, through nationalisation order, reconstitution programme and directed initiatives many banks were merged, reconstituted and taken over by other banks.

The decision of merging weak banks is definitely a good move but execution of the same is a huge challenge. For making the move effective and successful some points may be taken into active consideration. The concerned authorities need to review/analyse the experiences of previous bank mergers in our country. Review of the performance of the merged banks in India in 2020 may also provide us valuable inputs. Performance appraisals of banks merged in Bangladesh reveal that private sector banks and foreign banks merger achieved satisfactory improvement in their post-merger performance. Most of the key financial indicators of these banks reflected notable development after merger. On the other hand, the state-owned bank merger in our country failed to maintain even pre-merger financial position, let alone make any improvement. At the same time, Indian Public Sector Banks (PSBs) merger in 2020 have attained remarkable improvement in almost all spheres of their operations after merger. The post-merger performance review reveals that almost all the indicators like deposit, advance, NII, and CRAR increased and NPL declined substantially from its earlier state. Only two of many financial indicators like 'other operating income' and 'percentage of maintained provision' plummeted very insignificantly. Indian authority also expects that these merged PSBs will produce more performance improvements in the forthcoming days.

Now we can look into the factors of success of private and foreign banks merger in Bangladesh and success of PSB merger in India vis-à-vis causes of failure of state owned banks' merger in Bangladesh. The key factors identified behind success of merger of private and foreign banks in Bangladesh are-- ensuring good governance and management, removing unnecessary and inefficient manpower, reengineering products and services and adopting huge technological transmission etc. In Indian PSB merger, key principle was merging with the bigger and the stronger. Along with many other factors, the principle of merger with the bigger and the stronger contributed to a large extent towards the success of Indian PSBs mergers. Critical analysis/review of state owned banks merger in Bangladesh revealed absence of these key success factors.

As the roadmap stipulates, weak banks will be merged with strong banks. This is obviously the pre-condition of the success of merger. In doing so, necessary precautions need to be taken so that this does not set any bad precedent in the sector -- with wrongdoers willfully making their respective banks weaker in the hope of merger with strong ones. Alongside continuation of the merger process, it is crucial to ensure strong monitoring and supervision to prevent these apprehended ill motives of banking sector perpetrators. For making the most talked about bank merger move effective and successful, it is also essential to craft a well thought out merger policy first, taking into account international practices, realities of Bangladesh, the secrets of success of private and foreign banks in the country and around the globe vis-a-vis the causes of failure of banks in the country. Simultaneously, assessment of the true health of both transferee and transferor banks, taking appropriate measures for disposal of distressed assets, identifying the incentives to be provided etc are crucial. It is vitally important to identify the culprits responsible for creating anarchy and instability in the banking sector and bring them to justice for their misdeeds; otherwise the move may fail to attain expected result.

Bank merger is a big decision and complex process. If done prudently, it may pay off or it may cause peril if done haphazardly. Choosing the right partner, ensuring efficient management, rationalising manpower, expediting digitisation and ensuring adequate capital are crucial factors for success of bank merger. In executing future merger decisions concerned authorities need to pay due attention to these factors. Finally, the merger strategy of weak banks should be to resolve the problems once and for all.​

 

[Saif]

Banks see slow rebound from liquidity shortages

Cash-strapped banks seem to be slowly bouncing back from liquidity crunch on cash feeding by the central bank that has handed out a record amount to the bankers. The improvement is basically reflected in two key liquidity-measuring indicators -- the volume of excess liquidity in banks and un

thefinancialexpress.com.bd

Banks see slow rebound from liquidity shortages
BB hands out record cash supports to bankers in woes
JUBAIR HASAN
Published :
Apr 26, 2024 00:22
Updated :
Apr 26, 2024 00:22

Cash-strapped banks seem to be slowly bouncing back from liquidity crunch on cash feeding by the central bank that has handed out a record amount to the bankers.

The improvement is basically reflected in two key liquidity-measuring indicators -- the volume of excess liquidity in banks and uninvested cash in vaults. The disposables marked a sharp rise this past February.

Excess liquidity includes various cash and cash-equivalent assets, including treasury bills and bonds, along with cash reserves other than liquid assets while uninvested cash means the credits that are available in the vaults.

According to Bangladesh Bank (BB) statistics, the volume of uninvested excess cash in the banking system had stood down at Tk 116.30 billion by June 2023. The figure plummeted further, reaching Tk 54.30 billion in November 2023 and Tk 51.56 billion in January 2024. Thereafter comes a rebound, the figure rising to Tk 76.43 billion by the end of February last, the data showed.

On the other hand, the excess liquidity in commercial banks was recorded Tk 1.66 trillion in June last year. The volume of the excess liquidity was Tk 1.41 trillion in November, Tk 1.63 trillion in December, 2023 and Tk 1.55 trillion in January this year.

But the figure rose to Tk 1.65 trillion in the following month of February, showing a sign of rebound, according to the BB data.

Seeking anonymity, a BB official told the FE that the liquidity situation in the banking industry started improving after months of tightness because of various policy supports of the central bank.

"The commercial banks have been fully meeting government's domestic bank-borrowing requirement after the central bank's decision skipping 'devolvement' to contain inflation from early this financial year (FY'24) and it put liquidity in banks under immense pressure," he said.

To give a breathing space for the credit-hungry banks, the central banker said, the banking regulator unrelentingly accepts all the fund-requirement appeals from the commercial lenders.

"As a matter of fact, liquidity feeding into the banks keeps rising significantly in recent months, which helps improve the liquidity in banks to a large extent."

According to the BB statistics, the central bank lent liquidity dollops amounting to Tk 633.47 billion in June 2023.

The volume of cash funnelled into the fund-starved banks further swelled to hit Tk 3.45 trillion in November, Tk 3.51 trillion in December and Tk 3.63 trillion in January 2024.

In February, the figure declined slightly, but stood over Tk 3.0 trillion.

Alongside the central bank's increased cash feeding, managing director and chief executive officer of Dhaka Bank Emranul Huq says, the credit demand is still on the downturn as port-import finance and offshore banking finance continue dropping in recent times.

"These could be the factors behind the improvement in two liquidity-measuring indicators," the bank's top executive told the FE correspondent.

Top executive of Jamuna Bank Mirza Elias Uddin Ahmed says the banking sector has enough stock of surplus liquidity. But there are few banks having some inherent problems like growing NPLs which face liquidity crunch as they are not getting credit support from interbank sources.

"So, they desperately need fund from the central bank. Otherwise, the liquidity situation is fine in the industry now," he added.​

 

[Saif]

A perplexing decision by Bangladesh Bank

Who will gain from its restrictions on media access?

www.thedailystar.net

A perplexing decision by Bangladesh Bank
Who will gain from its restrictions on media access?

VISUAL: STAR

The recent restrictions placed on journalists' access to the Bangladesh Bank (BB) have evoked understandable criticism from the journalist community as well as from Transparency International Bangladesh (TIB). It is quite a perplexing decision coming from a public institution which, by definition, is supposed to serve public interests. The media, too, is morally mandated to serve public interests. This it does by disclosing finance and banking related information, including any irregularities allegedly taking place in the sector. Access into Bangladesh Bank is thus crucial for any journalist covering the sector. We are, therefore, quite alarmed that the BB could take such a restrictive measure.

The central bank has reportedly instructed its security management and other departments not to allow journalists to enter its offices. The unprecedented restriction means that journalists covering the economy and finance will not be able to properly cover issues related to the economy. This is a disservice to the public but also to the government, which needs an honest appraisal of what is happening at the BB to make proper and timely interventions. Such reporting is all the more necessary at a time when the financial sector is facing severe challenges, including various irregularities, high inflation, and a dollar crisis that has affected many businesses and consumers.

Thus, journalists covering the economy and financial sector need full and unrestricted access to the Bangladesh Bank in order to get correct and verified information. Bangladesh Bank itself should also want to be accessible so that there is minimal risk of misinformation or rumours being circulated. All this makes its aforementioned decision rather difficult to understand.

The message emanating from such restrictions is not the kind that a democratic government would want to send to the people. It gives off the impression that this is being done to protect the interests of certain powerful quarters that have been playing a major role in the irregularities of the financial sector. We, therefore, urge Bangladesh Bank authorities to remove these restrictions so that journalists can have free access to the central bank as they did before. By exposing anomalies in the financial sector, journalists are upholding the people's right to know and helping the government by providing insights into this crucial sector so that problems are identified and solutions can be developed and applied. Surely this is a win-win system for all parties.​

 

[Saif]

Defaulting by top 3 borrowers could hit bank sector hard

Resilience in Bangladesh’s banking sector could be significantly affected if top three borrowers default on their loans, as outlined in a financial stability assessment report by the Bangladesh Bank...

www.newagebd.net

Defaulting by top 3 borrowers could hit bank sector hard
Staff Correspondent 29 April, 2024, 22:32

| — New Age file photo

Resilience in Bangladesh's banking sector could be significantly affected if top three borrowers default on their loans, as outlined in a financial stability assessment report by the Bangladesh Bank.

The report, covering the July-September quarter of 2023, indicated that such a default would have the most substantial impact on the sector's resilience, followed by a 3 per cent increase in non-performing loans.

For both shock scenarios, Capital to Risk-weighted Assets Ratio of the banking sector would fall below the minimum regulatory requirement of 10 per cent, it said.

A 3-per cent increase in non-performing loans or a default of the top three borrowers is likely to affect the banking sector's resilience significantly. Otherwise, the sector would remain resilient to all adverse shock scenarios.

The said report found a slight deterioration in the banking sector's resilience in terms of maintaining the minimum required CRAR and the number of non-compliant banks.

If the top three borrowers of each bank defaulted, nineteen banks would fail to maintain the minimum required CRAR, the report said.

If NPLs increased by 3 per cent, five banks would fail to maintain the minimum required CRAR.

The report said that among broader risk factors, credit risk remained the major one for the banking sector in terms of its impact on capital adequacy.

At end-September 2023, the CRAR of the banking sector stood at 11.08 per cent, marginally lower than that of the previous quarter.

At end-September 2023, profitability in the banking sector, as measured by return on assets and return on equity, slightly declined to 0.41 per cent and 7.46 per cent respectively from that of 0.43 per cent and 7.88 per cent in the preceding quarter.

During the review quarter, the domestic economy faced a number of challenges, including elevated inflation, a decline in foreign exchange reserves and devaluation of the local currency.

At the end of September 2023, annual average inflation increased to 9.29 per cent, 0.27 percentage points higher than the preceding quarter.

Wage earners' remittance inflow registered a decrease of 11.99 per cent from that of the preceding quarter and stood at $4.91 billion at the end of the review quarter.

At the end of September 2023, the gross foreign exchange reserves stood at $26.91 billion, while it would be $21.06 billion as per BPM6.

The Bangladeshi taka has been experiencing depreciation against the US dollar for several quarters, with the dollar rate reaching Tk 109.97 compared with Tk 105.92 at the end of June 2023.​

 

[Saif]

The concept of a public institution eludes our central bank

BB has recently restricted the journalists’ access for no reason in sight.

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The concept of a public institution eludes our central bank

Illustration: Biplob Chakroborty

In the mid-1980s, military dictator HM Ershad banned BBC's journalistic operations in Bangladesh. In March 2022, the Taliban banned BBC's local language services in Afghanistan. It can thus be theorised that authoritarian rulers simply hate any journalistic investigations because the press is detrimental to their longevity. But for journalists' normal, professional access into a financial institution in Bangladesh to be barred is an untimely absurdity. It raises a question as to whether something is really wrong within Bangladesh Bank (BB) right now, given that the regulator is floundering in the theatrics of mergers and trying to convert rotten apples to fresh oranges by covering up multiple loopholes.

BB has recently restricted the journalists' access for no reason in sight. Of course, BB's policy restlessness in recent months surrounding default loans, the dollar's exchange rates, reserves, remittance, inflation, and mergers have drawn in more criticism than praise from the media. Meanwhile, journalists have been reporting BB's half-baked ideas and erratic steps. They are only doing their job, as they have been for so long. It is their noble duty to report any public or private sector wrongdoings so as to alert the nation. So what's the problem?

The BB governor has attempted to explain the decision as trying to protect some "top secrets" of the central bank. If the so-called top secrets aren't religiously private, he is supposed to share these with the public via the media. People have every right to know such information since the central bank is the regulator of banks which live and thrive on people's money. And the BB is not like police headquarters; it doesn't handle murder cases which may warrant confidentiality. The culprits BB might be dealing with are wilful defaulters who are at the root of plundering the financial sector and thus placing the economy on the cliff's edge. But even these cases shouldn't be kept secret. The BB governor is a custodian of the state's interests, not those of loan defaulters. Being a hundred percent transparent is the first point of his oath.

The culture of central banks addressing journalists has been there since the early 1990s. Economist Alan Blinder, the then vice-chair of the Federal Reserve System, championed the culture of making central banks more accessible for and accountable to the public. His campaign, "Fed listens," has been a paragon of how a central bank must ensure free flow of information. The journalists help establish communication between policymakers and the public. The current Fed chair Jeromee Powell regularly meets with journalists after every policy decision; so does the governor of the Bank of England, Andrew Bailey. The current president of the European Central Bank (ECB), Christine Lagarde, previously the chair and managing director of the International Monetary Fund (IMF), invites the press for question-and-answer sessions quite regularly. The ECB also welcomes public tours to improve the common understanding of how central banks work and what purposes they serve.

The IMF outlines four principles of communication by central banks. It asserts that communication should be clear, candid, and transparent. Second, communication should reach all segments of the population. Third, communication should take place regularly. Fourth, all economic agents should have equal access to the same information. Ben Bernanke, who chaired the Fed and won the economics Nobel Prize, made it clear that central bank governors are public servants, and it is their responsibility to provide the public with as much explanation of their decisions as possible. Former Reserve Bank of India governor Raghuram Rajan faced journalists quite confidently because he understood economics well and didn't fear being dethroned by any tycoon groups. None of those mentioned above resorted to using their spokesmen to justify their stances because the respective governments appointed them knowing that these leaders know how the economy functions and thus can speak for themselves. At any central bank, every information is public information, and hiding anything is equivalent to doing a disservice to the government.

The economy is facing high inflation and reserve depletion. The banking sector in particular is in its most appalling state, requiring constant checkups like a patient in the ICU. In such a situation, journalists are akin to those devices surrounding the patient which work tirelessly to report BB's financial symptoms to the public.

BB needs extensive interactions with journalists more than ever before, because journalists can read the public pulse and communicate with stakeholders efficiently. No other service can replicate the functions which the media carries out for the public. Journalists mustn't be seen as counterparties, nor are they enemies of state interests. BB should rather engage with journalists as well-wishers and counsellors in regards to policy steps. Had BB adopted this practice in early 2022 when the prevailing crises began to surface, the governor would have been regarded as a good policymaker by now. But BB's attitude towards journalists has recently been more bureaucratic than accommodative, and that is doing more harm than good.

Restricting journalists in the secretariat should in no way be a good example that is blindly replicated in an institution like BB or the Bangladesh Securities and Exchange Commission. These bodies deal with citizens' savings and investments and citizens have the right to inquire about what the custodians of their assets are doing with them at any point in time. Thus, preventing journalists from discharging their duties is unconstitutional and demeans the noble objectives of the Bangladesh Bank Order, 1972 which was framed under Bangabandhu's guidance after independence. BB must revise its approach to journalism by following global best practices and thus improving its knowledge base.

Dr Birupaksha Paul is a professor of economics at the State University of New York at Cortland in the US.​

 

[Saif]

Ever piling up NPL is responsible for liquidity crisis of banks: ‘Terrible trio’ cause banks to bleed

Breaking News, International News & Multimedia

thedailynewnation.com

Ever piling up NPL is responsible for liquidity crisis of banks: 'Terrible trio' cause banks to bleed
1 May 2024, 12:00 am

Mega corporates accused of intimidating bankers
Anisur Rahman Khan

The banking sector is reportedly being dominated by three mega companies, which are allegedly mishandling bank assets, leading to a liquidity crisis and other financial irregularities.

Reports suggest that those who oppose the unjust demands of these companies face severe consequences, including humiliation and threats.

Both private and state-owned banks, including Janata, Rupali, Sonali, and Agrani, are grappling with significant liquidity issues. As part of the terms for a $4.7 billion loan from the International Monetary Fund (IMF), the government must reduce defaulted loans in state-owned banks.

Several high-ranking officials in the banking sector, speaking anonymously, have voiced concerns that these companies, with political backing, are exploiting bank assets, causing the sector to deteriorate rapidly.

They lament the lack of support from the central bank in pursuing legal action against these powerful entities.

One senior banker, requesting anonymity, emphasised the necessity of strict enforcement of laws against loan defaulters to enable banks to recover significant amounts of defaulted loans.

Failure to apply these laws rigorously is exacerbating the crisis facing financial institutions, he observed.

According to Bangladesh Bank data released recently, defaulted loans surged to Tk145,633 crore at the end of December 2023 from Tk120,656 crore at the end of December 2022 and Tk103,273 crore in the same period in 2021.

For example, the state-owned Rupali Bank has filed 3,217 cases against defaulted borrowers with the Artha Rin Adalat to recover over Tk 7,103 crore.

According to the Rupali Bank report, the total amount of the bank's default loans stood at Tk10,580 crore at the end of April 2023, and Tk7,103.08 crore of this massive default loan is stuck with 100 big borrowers.

According to multiple sources, the bank bears the burden of lending without proper scrutiny and investing in weak financial institutions to institute loans following its failure to recover the growing number of defaulted loans.

The Rupali Bank was lending to big businesses and individuals randomly but failed to recover loans on time, sources said.

As per data of the Rupali Bank show that Virgo Media (Tk 302.14 crore), Ibrahim Consortium (Tk 283.03 crore),Japan Bangladesh Security Printing and Papers Ltd (Tk 241.62 crore), Messers Prize Club general Trading Ltd (Tk 112.38 crore), Bangladesh Auto Rickshaw Chalak Samaboy Samity Ltd (Tk 42.93 crore), DSL Sweater Ltd (Tk 59.79 crore), Shafiq Steel (Tk 153.13 crore), Mabia Ship Breakers (Tk 151.93 crore), Water Heaven Corporation, Crystal Steel and Ship Breakers Ltd (Tk 147.38 crore), Jaso Allocating (Tk 66.64 crore), ND Grioup (Tk 49.99 crore), Setu International (Tk 39.48 crore), Fahad Garments (Tk 38.65 crore), Mastex Industries Ltd (Tk 34.77 crore), Bangladesh Auto Tempo Porter Cab Somoboy Samity (Tk 31.07 crore), Legacy Footwear (Tk 30.71 crore), Nasrin Zaman Knitwears Ltd (Tk 30 crore) Islam Khan Jute Mills (Tk 21.95 crore), Memory World (Tk 92.13 crore), Benitex Industries Ltd (Tk 379.81 crore), M/S Beautiful Jacket (Tk 140.2 crore) and Messers Dream Knitting (Bd) Ltd (Tk 105 crore) in defaulted loans to Rupali Bank.

Besides, Chattogram-based Nurjahan Group, AA Knit Spin Limited, HR Spinning Mill, Chattogram SA Group, M Rahman Steel, Jaz Spinning, Panna Textile, HZ Agro, Himalaya Paper and Board, Western Engineering, and Chowdhury Leather are also on the list of loan defaulters with Rupali Bank.

"The respective managers in all branches across the country have to submit updated reports regarding cases filed against the loan defaulters every day. The bank authority is very serious about realising the defaulted loans," Md. Shahedur Rahman, General Manager of Rupali Bank, told The New Nation.

Md. Shahedur Rahman, who is also the Rupali Bank board secretary, said that they are continuously operating drives as per the directives of the Board of Directors of the Rupali Bank.

A top banker, preferring anonymity, said that some big companies rescheduled their huge loan payments just to pay a small amount of money.​