The Rupali's yearly target of recovering such loans has been set in its memorandum of understanding (MoU) with the central bank.

Although the bank was supposed to recover Tk 35 crore from the top listed defaulters by December 2006 as per the MoU, it has been able to recover only Tk 2.90 crore during the January-June period this year. The bank has outstanding loans of Tk 559.37 crore to the 20 top defaulters.

The bank's performance in the year's first half has marked the failure in improving internal management besides poor recovery in the increasing bad loans.

"We are in a transition period as the bank is going to be handed over to a foreign buyer. Considering the overall situation, the performance is not bad," a high official of Rupali Bank claimed while talking to The Daily Star.

As on June 2006, the total classified loan of the bank stood at Tk 867.42 crore, of which Tk 60 crore was supposed to be recovered as per the central bank's directive. But the bank recovered only Tk 11.80 crore, registering only 18.33 percent success in its yearly target.

The central bank review said Rupali should accelerate its recovery rate to achieve 100 percent target.

The MoU limited the growth in total outstanding loans and advances of Rupali to three percent. During the January-June period, such a growth, however, did not cross 1.75 percent, the review noticed.

As at least 5 percent reduction in Rupali's operational expenses is desired, the bank has been given a directive to keep such expenses within Tk 126.85 crore in 2006. But during the first half of the year it spent 54.73 percent of its yearly target, which stands at Tk 69.43 crore.

Most have been spent on staff salary, Rupali Bank sources said, adding that reduction in staff salary is not possible, though the bank is putting its efforts on cutting other costs gradually.

The cost of deposit of the bank, however, increased. As on June 2006, the cost of deposit stood at 4.12 percent, which was 4.09 percent by the end of last year.

Loan and deposit interests have increased in the banking sector due to central bank's tight monetary policy, bank sources said.

The bank was almost successful in achieving its target of collecting deposit in the first six months of the year. With the target of Tk 7,160.79 crore, it collected Tk 7,093.86 crore, which was 99.06 percent of its target.

In disbursing loans and advances, the bank has been able to achieve 98.79 percent of its target during the first six months of the year.

The bank made a profit of Tk 16.32 crore in the January-June period, which was 43.52 percent of its target.