Three state banks move up ranks

Bangladesh Bank (BB) in its latest CAMELS rating has upgraded the position of three state-owned banks (SOBs), but Rupali Bank failed to achieve any improvement.

However, all the four SOBs gave loans beyond their limits in three sectors, which the central bank said may create risk in their resource management.

The CAMELS (capital, asset, management, earning, liquidity and sensitivity to market) rating was conducted in June.

Sonali, Janata and Agrani banks graduated to level-3, while Rupali is still at level-4. In the last two decades they were in level-4 or 5.

A senior BB official said this is the first time the three banks reached level-3 and it was a result of the reform programmes taken in the banks in the last couple of years.

The reform programmes are being implemented with financial assistance from the World Bank. The three banks were turned into public limited companies and their chief executive officers were appointed on competitive basis. The banks were given performance target, which is being evaluated every three months by the central bank.

Besides the performance target, separate memoranda of understanding are signed between the banks and the BB every year and their performances are assessed on the basis of the MoUs.

BB officials said the banks earlier used to incur loss, but now they make good profit every year. The banks logged operating profit of Tk 990 crore in the first three months of this year.

The government had earlier taken an initiative to privatise Rupali Bank but did not succeed. The absence of a decision on how Rupali would run is causing bad performance by the bank, the officials said.

According to the CAMELS rating, the three banks did not have any capital deficiency.

The amount of Sonali Bank's required capital was Tk 2,105 crore, whereas its actual capital was Tk 2,782 crore, BB statistics in June showed.

Janata Bank's required capital was Tk 1,029 crore and its actual capital was Tk 1,160 crore, while Agrani Bank's required capital was Tk 834 crore and its actual capital Tk 925 crore.

However Rupali Bank's deficit was Tk 433 crore against its capital requirement of Tk 531 crore.

According to the BB rating report, other financial indicators also showed significant improvement for the three banks.

The report said the four banks gave excessive amount of loans to readymade garment, housing, textiles and Bangladesh Petroleum Corporation (BPC), which the central bank termed risky.

Sonali Bank gave loan equivalent to 117 percent of its total capital to RMG and textiles sectors, while 45 percent went to BPC alone.

Janata distributed 145 percent of its total capital to RMG and textiles and 107 percent to BPC.

Agrani gave 131 percent of its total capital to the housing sector and 160 percent to BPC, while Rupali disbursed 332 percent of its total capital to RMG and textiles.

The acceptable limit for giving loan to any sector is 15-50 percent.

The BB report said if excessive loan is given to a sector and it is affected in future, the banks' resource management may plunge into crisis.

A high official of Agrani Bank said: "We are trying to diversify loan gradually."