The central bank has asked four state-owned commercial banks, or SoCBs, to gear up the recovery drive, keeping in mind top 20 defaulters.
The instruction was given at a meeting held at the Bangladesh Bank headquarters in the capital on Thursday to review the memorandums of understanding of the four banks - Sonali, Janata, Agrani and Rupali. BB governor Fazle Kabir chaired the meeting.
The central bank's latest instruction came against the backdrop of rising trend in non-performing loans, NPLs, in the banking sector, particularly the SoCBs in recent months.
The amount of classified loans jumped by nearly 20 per cent or Tk 185.14 billion to Tk 1,124.25 billion as on June 30 this calendar year from Tk 939.11 billion six months ago.
During the first half of the current calendar year, the total amount of NPLs with four leading SoCBs rose to Tk 437.40 billion from Tk 391.77 billion on December 31 last, the BB data showed.
"We've asked the SoCBs to reduce their volume of NPLs through intensified recovery drives," a BB senior official told the FE after the meeting.
He also said there is no alternative to strengthening the recovery drives for improving the financial health of the public sector banks.
The chief executive officers (CEOs)-cum-managing directors (MDs) of the banks and four observers were also present in the meeting.
The central bank had earlier appointed the observers to the SoCBs for improving financial health through implementation of the MoUs properly.
At the meeting, the SoCBs senior executives held out the assurance that the amount of classified loans would decrease by the end of this calendar year, helped by their drives.
"We're trying to recover the NPLs, particularly from top-20 defaulters," an executive of a leading state lender told the FE.
The public banker also said the BB's latest policy will help slash the amount of NPLs in the country's banking sector, including in the SoCBs by December this year.
The central bank offered a special facility to loan defaulters on May 16, allowing them to reschedule loans by paying 2.0 per cent down payment for a maximum of 10 years.
The SoCBs have also been advised to focus on SME (small and medium enterprise) lending, particularly for the manufacturing sector along with large loans to minimise the risk, according to another official.
"It will also help create employment opportunities across the country," the central banker said.
The BB advised the SoCBs to use all type of options -bond issuance, own profits and reduction of risk weighted assets-to meet their capital shortfalls. The overall capital shortfall of the four SoCBs stood at Tk 28.25 billion as on June 30 this calendar year. It was Tk 120.19 billion six months before.
Besides, the SoCBs have been asked to be more careful in case of borrower selection and exercise due diligence while sanctioning fresh loans, according to the BB officials.
The public banks 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.
The meeting also reviewed various issues, including liquidity situation, recovery of NPLs, particularly from top 20 defaulters, credit growth, operating expenses and cost of funds of the SoCBs. At the same meeting, the public banks have also been asked to improve their internal control and compliance in line with the BB's advice to check fraudulence and forgery, the official added.