Loan distributions: MoF asks specialised banks to stay within mandates

The Ministry of Finance (MoF) has instructed specialised banks to distribute loans according to their mandates after it was found that they were going beyond their authorised areas.

Officials say the specialised banks were formed with the target to make loans available in some special sectors, especially small and medium ones.

But they were found to be providing a portion of their loans to large-scale sectors and areas not within their mandates.

The ministry gave the instruction at a recent meeting chaired by Special Assistant to Chief Adviser for Ministry of Finance Dr Anisuzzaman Chowdhury.

The meeting was organised to review the business activities of the state-owned specialised banks, BASIC Bank, and Bangladesh House Building Finance Corporation (BHBFC).

It reviewed the banks' deposit collections, loan distributions, capital situations, agriculture and rural loan distributions, small and medium industry loan distributions, non-performing loans (NPLs), cash recovery from non-performing loans, and recovery from written-off loans.

According to sources, while discussing the higher non-performing loan issue of the specialised banks at the meeting, Mr Chowdhury said some specialised banks had the tendency to distribute commercial loans beyond their mandated areas.

As many of those loans turned default, he asked the specialised banks not to distribute commercial loans to avoid the buildup of non-performing loans.

The meeting was told that default loans were much higher at Bangladesh Krishi Bank and BASIC Bank, while such loans had increased at Rajshahi Krishi Unnayan Bank (RAKUB) and Probashi Kallyan Bank in September 2025 compared to June that year.

Also, the meeting was told that loan distributions by the specialised banks and financial institutions saw an upward trend.

RAKUB's loan distributions were much higher compared to its deposit collections.

"Specialised banks and financial institutions were formed under separate acts with specific targets. Thus, they should stay away from distributing loans in areas that do not match the purpose of their formation," said Mr Chowdhury.

He instructed the specialised banks and financial institutions to take special initiatives to distribute loans in the cottage, micro, small, and medium enterprise (CMSME) sector to help it flourish.

"The borrowers in the CMSME sector are lower-income groups, and they want to get loans again by repaying the previous ones. So, the number of loan defaulters in this segment is very small," he said.

The meeting found that the rate of recovery from written-off loans was "not satisfactory" and asked the bank authorities to expedite the process.

Also, they were asked to set separate targets for recovering default loans and written-off loans, saying the higher management of the banks should regularly monitor the recovery situation, according to sources.

syful-islam@outlook.com