sked the banks to send monthly report on such lending by 10th of the following month. The central bank issued the circular after it found that big loans disbursed by some banks are still exceeding the regulatory limit for single borrower (up to 25 percent of a bank’s total credit-portfolio), set in line with the Bank Companies (Amendment) Act-1991. “Banks must bring down the single-borrower exposure limit to the allowable level of 25 percent. We will monitor big loans from now on in order to minimise the credit-risk of both the banks and the depositors,” said a BB official, seeking anonymity, on Saturday. The senior official of the central bank, however, didn’t name the banks. He said banks were also directed to look for diversified sectors and give priority on new sectors and regions so that loans are disbursed in an equitable manner to promote the country’s overall economic development. He said the central bank strictly directed the banks not to go for big lending to any individual, business entity or a region. He said banks have been giving priority on raising their loan portfolio in Chittagong, which has put a negative impact on other regions. “Huge risks pose for banks in big loans to single borrower – individual or business entity – which might affect the depositors in case of loss of capital by the banks,” said the BB official. Over last couple of years, the country’s banking sector experienced three major loan embezzlements at both state-owned and private commercial banks, resulting in huge capital losses in the banking sector and panicking the depositors and the fair clients. The Hallmark Group embezzled some Tk 35.45 billion from Sonali Bank, the Bismillah Group’s loan-forgery involved around Tk 11 billion from five private banks, including Prime Bank while the latest loan-scam of Tk 45.50 billion took place with state-owned Basic Bank. The government has vowed to take actions against the culprits after these loan-scams were revealed by the central bank and media. Meanwhile, the Anti-Corruption Commission (ACC) has started the procedures to punish the perpetrators of the loan scams. Investigations found that big loans were disbursed to single borrowers in collaboration between the borrowers and bank employees. Following the exposure of the incidents, the International Monetary Fund (IMF) suggested the government for making the lending rules stringent the so that the financial sector could prevent recurrence of such loan forgeries. The banking sector has been experiencing a slow growth in large credit due to stricter rules imposed by the central bank on lending since the Hallmark fund embezzlement. This resulted in a fall in the income of banks for last couple of years. The Major Economic Indicator of the central bank released in July says disbursement of industrial term loans during the third quarter of FY14 (January-March periods) has plunged by 7.73 percent.
Sunday, August 10, 2014
BB warns banks over big loans:Daily Sun
sked the banks to send monthly report on such lending by 10th of the following month. The central bank issued the circular after it found that big loans disbursed by some banks are still exceeding the regulatory limit for single borrower (up to 25 percent of a bank’s total credit-portfolio), set in line with the Bank Companies (Amendment) Act-1991. “Banks must bring down the single-borrower exposure limit to the allowable level of 25 percent. We will monitor big loans from now on in order to minimise the credit-risk of both the banks and the depositors,” said a BB official, seeking anonymity, on Saturday. The senior official of the central bank, however, didn’t name the banks. He said banks were also directed to look for diversified sectors and give priority on new sectors and regions so that loans are disbursed in an equitable manner to promote the country’s overall economic development. He said the central bank strictly directed the banks not to go for big lending to any individual, business entity or a region. He said banks have been giving priority on raising their loan portfolio in Chittagong, which has put a negative impact on other regions. “Huge risks pose for banks in big loans to single borrower – individual or business entity – which might affect the depositors in case of loss of capital by the banks,” said the BB official. Over last couple of years, the country’s banking sector experienced three major loan embezzlements at both state-owned and private commercial banks, resulting in huge capital losses in the banking sector and panicking the depositors and the fair clients. The Hallmark Group embezzled some Tk 35.45 billion from Sonali Bank, the Bismillah Group’s loan-forgery involved around Tk 11 billion from five private banks, including Prime Bank while the latest loan-scam of Tk 45.50 billion took place with state-owned Basic Bank. The government has vowed to take actions against the culprits after these loan-scams were revealed by the central bank and media. Meanwhile, the Anti-Corruption Commission (ACC) has started the procedures to punish the perpetrators of the loan scams. Investigations found that big loans were disbursed to single borrowers in collaboration between the borrowers and bank employees. Following the exposure of the incidents, the International Monetary Fund (IMF) suggested the government for making the lending rules stringent the so that the financial sector could prevent recurrence of such loan forgeries. The banking sector has been experiencing a slow growth in large credit due to stricter rules imposed by the central bank on lending since the Hallmark fund embezzlement. This resulted in a fall in the income of banks for last couple of years. The Major Economic Indicator of the central bank released in July says disbursement of industrial term loans during the third quarter of FY14 (January-March periods) has plunged by 7.73 percent.
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