Banks are lending to large customers beyond limits.
There is a limit on how much a bank can lend to large customers. State-owned Sonali, Janata, Agrani and Rupali Bank have been violating that limit year after year and distributing loans in favor of large customers. As a result, a large portion of the banks’ loans have become concentrated with a few customers.
Most of the loans have been given through just five branches. The single customer limit has not been respected in lending. Economists and stakeholders believe that this aggressive banking has increased the risk of defaulted loans and capital losses for banks. To reduce this risk, they have suggested strengthening collection from large customers and decentralizing loans.
Banks are always more willing to give large loans. These loans are subject to pressure from influential people and various irregularities and corruption. In many cases, loans are given without considering the capacity and risk of the customer and without proper collateral. Stakeholders say that large customers were at the center of the looting that took place in banks in the name of loans during the Hasina government. Now that the real picture of those customers is starting to emerge, the banks’ defaulted loans have also increased. As a result, the risk of losing their capital has also increased.
Bangladesh Bank has been signing memorandums of understanding (MoUs) with these four state-owned banks since 2007 to improve their financial condition. In 2024, the central bank also signed a memorandum of understanding with the banks. In the MoU, Bangladesh Bank imposed various conditions, including maintaining minimum capital, keeping loan growth appropriate, reducing the risk of large loans and decentralizing loans, reducing defaulted loans to a minimum limit, strengthening cash collection from the top 20 defaulted lenders, and reducing operating expenses. Recently, Bangladesh Bank held a separate meeting to review the progress in meeting various targets and conditions set by the bank. It was chaired by Bangladesh Bank Governor Ahsan H. Mansur. The meeting was attended by the chairmen and managing directors of the four state-owned banks.
The review report of the MoUs presented at the meeting showed that all four banks had lent money to large customers in violation of the limit. Of these, Janata Bank had lent a record 77 percent against the 30 percent limit. Against the same limit, Agrani Bank’s debt stood at 35 percent.
Sonali Bank gave 40 percent instead of 38 percent. And Rupali Bank gave 31 percent, which is 1 percent more than the bank’s limit. Fearing that a large portion of the debt is stuck with large lenders, the governor suggested strengthening debt collection as well as decentralizing debt.
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