Almost half of the 294 branches of nine newly-established scheduled banks are loss-making as the defaulted loans at the banks continue rising.
According to the latest Bangladesh Bank data, 141 branches of the nine banks plunged into the loss-making situation as of June 30, 2016.
Officials of the BB and a new bank said the branches of the banks became loss-making due to rising defaulted loans at the fourth generation banks.
The nine new banks are also lagging behind the banks of the previous three generations as their deposit mobilisation and credit disbursement are lower than that of the older banks.
The BB data showed that the number of loss-making branches of Union Bank stood at 28 against the bank’s total 49 branches as of June 30, 2016, that of NRB Global Bank at 16 against 27, that of NRB Bank at 14 against 20, that of South Bangla Agriculture and Commerce Bank at 19 against 47, that of NRB Commercial Bank at 11 against 42, that of Meghna Bank at 13 against 27, that of Midland Bank at nine against 20, that of Modhumoti Bank at 10 against 19 and that of The Farmers Bank at 21 against 43.
Defaulted loans in the newly-established banks increased by 1,161.41 per cent to Tk 561.41 crore as of September 30, 2016 from Tk 44.44 crore as of December 31, 2015 as the banks disbursed loans aggressively violating central bank rules, a BB official told New Age on Sunday.
The BB data showed that classified loans at Meghna Bank increased to Tk 57 crore as of September 30, 2016 from zero non-performing loans as of December 31, 2015, that at Midland Bank to Tk 27 crore from Tk 13.97 crore, that at Modhumoti Bank to Tk 6.41 crore from zero NPL, that at NRB Bank to Tk 28.13 crore from Tk 2.21 crore, that at NRB Commercial Bank to Tk 128 crore from Tk 5.87 crore, that at NRB Global Bank to Tk 33.12 crore from Tk 13.24 crore, that at South Bangla Agriculture and Commerce Bank to Tk 2.30 crore from zero NPL, that at The Farmers Bank to Tk 277 crore from Tk 9.06 crore and that at Union Bank increased to Tk 2.62 crore from Tk 0.09 crore.
Under the circumstances, the BB on November 20 warned the nine new commercial banks against rising defaulted loans and loss-making branches and asked them (banks) to speed up the recovery of the defaulted loans.
The central bank asked the banks to reduce their defaulted loans and loss-making branches within the shortest possible time; otherwise they will have to face strict BB measures.
The directives came from a meeting between BB high ups and the managing directors of the nine banks held at the central bank headquarters.
Most of the directors and chairmen of the nine banks are directly involved with either the politics of the ruling Awami League or those of its allies, the BB official said.
BB inspection teams have already unearthed various types of corruptions in disbursing loans by some of the new banks, he said.
The BB data showed that the number of loss-making branches of the nine banks was 154 against their total branches of 269 as of December 31, 2015.
Meghna Bank, one of the nine new banks, managing director Mohammed Nurul Amin told New Age on Sunday that the non-performing loan was one of the major causes of the rise in the number of loss-making branches of the nine banks.
He said that the branches of the new banks might need around five years to enter into the profitable zone as a significant number of people were still not familiar with the fourth generation banks.
The credit demand from the private sector has been maintaining a sluggish trend in recent months that has also put an adverse impact on the profitability
of the nine banks, Amin said.
‘The nine banks have to maintain 1:1 ratio in setting up branches in rural and urban areas. The branches in rural areas usually take long time to enter into the profitable zone,’ he said.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking