The central bank has asked the five state-owned commercial banks (SoCBs) to submit their action plans as early as possible to improve financial health through reducing the volume of classified loans.
The instruction was given at a meeting held at the Bangladesh Bank (BB) headquarters in the capital on Monday to review the memorandums of understanding (MoUs) of the five SoCBs -- Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank and BASIC Bank.
BB Governor Fazle Kabir chaired the meeting.
Recovery of classified loans through strengthening recovery drives along with the mechanism to improve capital shortfall by the end of this calendar year will be included in the plan, meeting sources said.
At the meeting, the state-owned banks have also been advised to use all type of options -recapitalise fund, issuing bonds, own profits and reducing amount of the risk weighted assets - to meet their capital shortfalls.
The BB's latest instructions came against the backdrop of rising trend of the overall non-performing loans (NPLs) in the banking sector, particularly the SoCBs in December in the last calendar year.
The total amount of NPLs with six SoCBs rose to Tk 373.26 billion as on December 31, 2017 from Tk 310.26 billion a year before. It was Tk 385.17 billion in the third quarter of 2017.
The SoCBs have also been advised to be more careful in case of borrower selection and exercise due diligence while sanctioning fresh loans.
"We've asked the SoCBs that no fresh loan will be turned into default one," a BB senior official told the FE after the meeting.
He also said there is no alternative to boosting recovery drives to improve their (SoCBs) financial health.
The SoCBs have also been asked to meet their capital shortfall immediately using all type of options in this connection.
The overall capital shortfall of the four SoCBs out of six rose to Tk 88.53 billion as on December 31 last year from Tk 76.26 billion three months before.
Talking to the FE, another BB official said higher default loans are the main reason behind the rise in provisioning requirements, which ultimately pushed up their capital shortfall.
The chief executive officers (CEOs)-cum-managing directors (MDs) of the banks and five observers were also present in the meeting.
The BB earlier appointed the observers to the SoCBs for improving financial health through implementation of the MoUs properly.
The SoCBs have also been asked to go for small and medium scale loans instead of large ones for minimising their risks, according to the central banker.
The meeting also reviewed various issues, including recovery position of NPLs, particularly top 20 default loans and credit growth of the SoCBs.
The SoCBs have already been asked to strictly abide by the existing core risk-management guidelines for improving their efficiency.
The central bank had earlier identified six core risk areas in the country's banking sector: credit, asset and liability, foreign exchange, information technology, internal control and compliance and money laundering.
At the same meeting, the public banks have also been asked to improve their internal control and compliance in tandem with the BB's advices to check fraudulences and forgeries, the sources added.