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Directors rely on fellow PCBs for large loans
A substantial amount of loans have been taken by a good number of directors of private commercial banks (PCB) from other PCBs but such loans are not being serviced in time.
This has led to a marked upward trend in default loans, officials said.
The outstanding amount of loans taken by the directors of PCBs stood at Tk 8.23 billion in March last compared to Taka 1.18 billion in December last, registering almost a six-fold rise during the period under report.
Of this total amount of loans at the close of March last, Tk 830 million or 10.06 per cent turned classified, according to the Bangladesh Bank (BB) data.
"This is the highest amount of default loans so far, on account of different directors of PCBs and the situation is frustrating," a BB high official said.
"There are restrictions in force upon directors on taking loans from their own banks. But taking excessive loans from other PCBs is not also a fair practice. This is no good norm. The BB should look into the matter," former BB governor Dr. Salehuddin Ahmed told the FE Friday.
"The default loans are eroding the efficiency of the banks, depriving the customers of having access to credits and also getting better services. Taking such a large amount of loans by directors to serve their own business interest is not a fair practice," he added.
The loans of PCB directors from other banks have been increasing, much to the concern of the central bank, official sources said.
Besides the rise in default loans of bank directors, the accumulated burden of loans in default has also been growing, in general, in the country's banking sector.
The sources attributed the worsening default loan situation largely to the global meltdown and high lending rate and also to the standoff between the country's two major political parties.
A PCB director said the percentage of default loans with many banks went up, as some directors and other large clients could not service their debt in time.
"The requests for loans for the directors were particularly accommodated quickly in a random way. The volume of such loans shot up as a result," he added.
A director can take Tk 10 million in loan from his own bank. But if he wants to take over Tk 1.0 million, he has to take the prior approval from the central bank. As such, many directors prefer not taking any loan from their own bank mainly due to the requirement of prior approval from the BB, a PCB director told the FE.
The rate of sanctions of loans to directors by some PCBs is abnormally fast and there are some strong reasons to believe that such loans may soon turn into default loans, BB sources feared.
When a director of a PCB sends a proposal for a big loan to the board of directors of another PCB, that bank does not hesitate to sanction it, the concerned sources said.
If the directors concerned default on repaying such loans, they manage to get such credits rescheduled in cooperation with other directors, said a former PCB director.
The BRAC Bank, as the BB figures show, tops the list with the highest amount of loans sanctioned to other banks' directors. The amount stood at Tk 2.63 billion at the end of March last.
The AB Bank stood at the second position with Tk 2.359 billion.
The UCBL has been in the third position with Tk 820.71 million. The whole amount of such loans by the UCBL has now become classified.
On the other hand, the Islami Bank disbursed Tk 510.97 million, Shahjalal Bank Tk 360.73 million, National Bank Tk 350.54 million, The City Bank Tk. 320.54 million, Uttara Bank Tk. 270.89 million, Prime Bank Tk 170.35 million, NCC Bank Tk. 140.82 million and Standard Bank Tk. 120.59 million.
Southest Bank extended Tk. 20.45 million, Eastern Bank Tk. 0.34 million, IFIC Bank Tk. 0.368 million, Al-Arafa Bank Tk.10.57 million, SIBL Tk. 10.39 million, Mutual Trust Bank Tk 0.71 million, Premier Bank Tk.0.44 million, Bank Asia Tk. 1.7 million, Trust Bank Tk. 16.4 million, First Security Bank Tk 0.37 million and Mercantile Bank Tk 26 million until March last, according to the BB data.
[ First Page ] 2012-08-04