Chief executives of scheduled banks have questioned the slow pace of work inside Bangladesh Bank, alleging that crucial decisions remain stuck on officials’ desks for months and are paralysing the financial sector.
The issue triggered sharp exchanges between managing directors and central bank officials at Sunday’s bankers’ meeting, attended by Bangladesh Bank Governor Ahsan H Mansur and his deputy governors.
Multiple participants told TIMES that the governor intervened at one stage of the heated argument. He instructed that Bangladesh Bank must respond within seven days to any letter received from banks.
If no reply is issued within that period, banks may assume that the central bank has agreed to the matter, the governor was quoted as saying.
Bangladesh Bank occasionally holds meetings with managing directors of scheduled banks to exchange views on ongoing sectoral issues.
Several managing directors that attended the meeting said discussions covered policy support for non-performing loans, CMSME loans, nano loans and other matters.
But the central theme was the delay in receiving decisions from the central bank. Criticism was particularly directed at Deputy Governor Md Kabir Ahmed, under whose authority all policy-related departments of Bangladesh Bank operate.
“Hundreds of files wait for decisions on Ahmed’s desk for months. In trying to over-regulate, he is paralysing every process. The banking sector cannot function well under such conditions,” said one managing director, requesting anonymity.
The meeting also discussed the surge in non-performing loans (NPL).
The governor said they have pulled all bad loans out from under the carpet.
“This made the real picture of the banking sector visible,” he added, expressing hope that if defaulters’ loans are rescheduled or restructured under existing policy support, the NPL ratio will decline by December.
Bank MDs were asked to provide policy support to defaulting clients on a case-to-case basis. The governor said he expects sincerity from managing directors in reducing bad loans and thereby lowering the burden on their banks.
At present, nearly 36 percent of all loans in the banking sector are classified, amounting to Tk6.44 lakh crore.
Several managing directors raised objections regarding the new provisioning requirement for cottage, micro, small and medium enterprise (CMSME) loans.
Recently, the provision rate for these loans was raised four-fold from 0.25 per cent to 1 per cent. This means banks must now keep Tk1 in mandatory security reserves at Bangladesh Bank for every Tk100 of CMSME lending, the same requirement applied to general loan categories.
Some managing directors said the higher provisioning will discourage banks from lending to small and medium enterprises.
Although they requested reconsideration, Bangladesh Bank did not respond. Officials indicated that the central bank is having to scale back special facilities in this segment to comply with conditions set by the International Monetary Fund.
