IMF mission worried about state banks’ default loans

The visiting IMF staff mission yesterday raised questions about the swelling defaulted loans in the state-run banks in their meeting with the financial institutions division.

At the end of June, the six banks' classified loans stood at Tk 74,454 crore, which is 25 percent of total outstanding loans, according to the central bank's latest published data. Six months earlier, it was Tk 56,460 crore, which is 20.28 percent of their total credit.

The financial institutions division, led by secretary SM Salim Ullah, told the IMF mission that the defaulted loans have soared after the relaxed accounting on loan classification extended during the pandemic was withdrawn.

The mission, led by its chief Rahul Anand, sought the government's plan to bring down the defaulted loans in the state banks and the capital restoration process.

The IMF team also enquired about the banks' recent performance, risk management, planned reforms and recapitalisation.

The Bangladesh Bank and the financial institutions division are regularly monitoring the six banks and have set some targets to rebuild their health.

The central bank is evaluating their performance on the basis of the targets every three months and has appointed observers in most of the state-run banks.

At the meeting, the mission also wanted to know the update on their suggested amendments to the bank company act.

The amended bank company act has been enacted, and the rest of their recommendations are in the works, the finance ministry officials said.

The visiting IMF mission also sat with the managing directors of the Sonali, Rupali, Janata and BASIC Bank separately at the Sonali Bank head office.

The mission also met with the Md Nurul Alam, secretary of the ministry of energy and mineral resources, and sought the financial situation of Petrobangla and the Bangladesh Petroleum Corporation.

They also wanted to know about the recent changes in natural gas and petroleum product prices following the import prices and the implementation status of the periodic formula-based price adjustment mechanism of petroleum products.

Energy ministry officials sought some more time to implement the formula-based adjustment mechanism instead of the previously committed timeframe of December this year.

Since the fuel price is high in the international market, the mechanism may further fuel inflationary pressure.

Inflation averaged 9.75 percent in the first three months of the fiscal year, according to data from the Bangladesh Bureau of Statistics.

The mission sat with the senior officials of the commerce ministry, where they wanted to know the update of tariff policy. In response, the officials informed that the government will adjust the tariff policy gradually.

The visiting mission also wanted to know the reason behind the discrepancy between the export shipment and export proceeds, which is about $3 billion. The ministry informed that a committee is working on it.