Govt partly to blame for state banks’ soured credit: Muhith

Finance Minister AMA Muhith says the government is to blame for the rising loan defaults at state banks.

“Classified loans are very high,” the minister said at Sonali Bank’s Annual Conference on Saturday.

“The government is partly at fault. We often put pressure on the six (state) banks. As Sonali Bank is the largest bank, it faces the most pressure.”

During a question-answer session in parliament last month, Muhith said banks had failed to recoup Tk 656 billion from top borrowers in the past 10 years. Classified loans amounted to Tk 725 billion, he had added.

The Awami League was in power for nine of the 10 years Muhith discussed. Bad loans are roughly twice the cost of the Padma Bridge.

“We will try to put less pressure on you,” Muhith said at the event at Dhaka’s Diploma Engineers Institution on Saturday. “In the future we will use less of our influence when bank officials analyse a project and are unwilling to provide loans.”

“It is your main duty to know your customers and scrutinise any proposal to the best of your ability. Future success depends on project planning.”

Finance Ministry officials said the top 20 defaulters are responsible for a significant amount of these outstanding loans.

About 49 percent of Janata Bank’s default is in the hands of 20 customers, while the top 20 loan defaulters are responsible for 51 percent of Rupali Bank’s defaults and 32.4 percent of Sonali Bank’s defaults.

Bangladesh Bank Governor Fazle Kabir has also issued a recent warning for banks against long-term large loans to companies and lowered the advance-to-deposit ratio or ADR.