Ten worst-performing banks out of a total of 56 banks in the country held 48.2 percent of the total stressed assets in the banking sector at the end of December 2013, Bangladesh Bank said in a report on Wednesday. Of the banks, five worst-performing banks held 32.8 percent of the total stressed assets. Of the 10 worst-performing banks, three are state-owned commercial banks while three speciali
sed development banks, two domestic private commercial banks and two foreign banks, said the annual Financial Stability Report of Bangladesh Bank (BB). Bangladesh Bank Governor Dr Atiur Rahman formally unveiled the cover of Financial Stability Report-2013 in presence of the MDs and CEOs of most of the scheduled banks at the BB conference room. The report blamed lack of efficiency and transparency in the credit approval process, credit administration, credit monitoring, recovery and poor selection of borrowers, politically motivated lending and negligence in risk management practices for the existence of high rate of stressed assets. The data revealed that the banking sector loans are concentrated within a few sectors in FY2013. In particular, wholesale and retail trade showed a 20.57 percent concentration of the total loan portfolio, followed by large industries and import financing with a share of 19.10 and 12.67 percent respectively. Referring to the BBSs provisional estimation, the report mentioned that the nominal GDP of Bangladesh in FY13 was Tk 10,380 billion representing a nominal growth of 13.1 percent. Addressing the report unveiling ceremony, BB Governor Dr Atiur Rahman claimed that despite various obstacles, the countrys banking sector is now very stable. More than Tk 37,000 crore of capital has been gathered in banking sector so why the sector would not be stable, he added. Referring to a recent survey, the governor said 84 percent of customers have trust upon the banks whereas in India it is 77 percent. He said the state-owned banks are backed by the government despite having much more Non Performing Loan (NPL). The state owned banks attract more customers than private banks because people feel secure with the public banks, he added. The governor suggested that the CEOs of the private banks work intensively to find out their weaknesses and try to overcome them. He also asked them to follow the Central Banks model of in-depth supervision by using the latest technology in resolving their problems. He said the central bank will take stringent measure if anybody breaks the rule. A roadmap has been prepared to ensure the ratio of risk-based capital adequacy in the banking sector, he added. Atiur also said a guideline on BASEL-III has been issued although the banks will face little problems initially. But in the long run, the guideline will bring well-being for the banking sector as well as for the overall economy. The report also mentioned that the broad money (M2) growth stood at 16.7 percent in FY13, which is marginally lower than 17.4 percent growth of FY12. The growth in domestic credit declined by 10.9 percent in FY13 against 19.0 percent under the program and 19.2 percent actual growth in FY12 due to a significant slowdown in the private sector credit growth. The access to a greater range of foreign financing inflows led to a positive growth in NFA. The monetary multiplier increased to 5.38 in FY13 compared with 5.30 in FY12. The Financial Stability Report-13 mentioned that deficiency of corporate governance caused a few scams at some state-owned commercial banks and specialised banks and decline in real GDP growth may adversely affect the stability situation. It found that the ways like stringent loan classification and provisioning, constraint on loan rescheduling, ample liquidity at individual institutions and in the system as a whole, automation of the payment and settlement system, broad based financial inclusion program, emphasis on risk management in banks, improvement in the inflation situation and satisfactory international reserves may contribute to improving the stability situation. Chief Executive Officers of all the scheduled banks, deputy governors and other senior officers of Bangladesh Bank were present on the occasion.