Bangladesh Bank appoints observers to ‘save’ struggling NCBs

The central bank has appointed observers to Sonali, Janata, Agrani and Rupali banks, which are buckling under the pressure of default loans, in an attempt to heightened surveillance on the workings of these nationalised commercial banks.

The move came in the wake of an IMF team’s remark that the state-owned banks have ‘much higher’ amount of loans defaulted on than other banks, which has put a drag on the entire banking sector.

Bangladesh Bank’s Department of Off-Site Supervision informed the board of directors of the appointments on Wednesday.
 
Executive Director Mohammad Naushad Ali Chowdhury will keep a watch on Sonali Bank, Ahmed Jamal on Janata Bank, Nirmal Chandra Bhakta on Agrani Bank and Abdur Rahim on Rupali Bank.

The observers will attend meetings of the board, and audit and credit committees and give their opinion on seeing memo presented at those meetings.

They will report to the central bank if they find anything objectionable or against the law.

Deputy Governor SK Sur Chowdhury told bdnews24.com the appointment of the observers became imperative because the financial indices of the banks did not improve in line with the memorandum of understanding Bangladesh Bank had signed with these banks.

“The financial indices of these banks are falling continuously. Bangladesh Bank decided to appoint observers to arrest the slide.

“Because, despite having been provided with a raft of facilities, those banks could not cut down on the default loans. Again, they failed to ensure good governance,” Sur Chowdhury added.

Another official at the central bank, however, said the decision was dictated by the suggestion of the IMF.

An IMF staff team, led by Rodrigo Cubero, visited Dhaka during Nov 4-17 to hold discussions on the 2015 Article IV Consultation with Bangladesh.

It was at the time that the team suggested increased surveillance on the banks.

The four NCBs had as much as 21.84 percent of their loans combined defaulted on until the end of September, according to the Bangladesh Bank. They also suffer capital squeeze.

Approached for his reaction, Chairman of Agrani Bank’s board Zaid Bakht declined comment on the logicality of the latest move since he did not know what the context that prompted Bangladesh Bank to make the decision was.

But he said, “The central bank being the regulators can appoint observers any time or take any other decision.”