FE Report (November 13, 2010)
Bangladesh Bank has asked seven commercial banks to ensure due diligence before providing loans, particularly in large amount, officials said.
The instructions were given to the banks, which have higher credit growth than deposit, at separate meetings held last week with Executive Director of Bangladesh Bank (BB) SK Sur Chowdhury in the chair.
"We've cautioned the banks for taking effective measures to minimise their credit risks," Mr. Sur told the FE Friday, adding that the banks will have to maintain credit-deposit ratio (CDR) as well as ensuring due diligence before sanctioning loans.
The banks have also been asked to provide loan facilities to the productive sectors from their own deposits rather than borrowing from the money market.
"We've advised the banks to strengthen their lending to small and medium enterprises (SMEs) than corporate entities to help minimise their credit risks," the BB executive director said.
During the meeting, the central bank reviewed the overallinvestment patterns, sources of funding, sectoral concentration of loans and latest position of the CDR, the BB officials said.
"The banks will have to attract more deposits if they want to raise their loans," another BB senior official said, adding that there is no point in expanding credit by borrowing from the inter-bank call money market.
"We've discussed the issues with the banks as precautionary measures to minimise their credit risks through strengthening our supervision for ensuring quality of loans," the BB official said.
The banks have been asked to refrain from aggressive banking and improve efficiency by minimising their CDR, he added.
The instructions were given to the banks, which have higher credit growth than deposit, at separate meetings held last week with Executive Director of Bangladesh Bank (BB) SK Sur Chowdhury in the chair.
"We've cautioned the banks for taking effective measures to minimise their credit risks," Mr. Sur told the FE Friday, adding that the banks will have to maintain credit-deposit ratio (CDR) as well as ensuring due diligence before sanctioning loans.
The banks have also been asked to provide loan facilities to the productive sectors from their own deposits rather than borrowing from the money market.
"We've advised the banks to strengthen their lending to small and medium enterprises (SMEs) than corporate entities to help minimise their credit risks," the BB executive director said.
During the meeting, the central bank reviewed the overallinvestment patterns, sources of funding, sectoral concentration of loans and latest position of the CDR, the BB officials said.
"The banks will have to attract more deposits if they want to raise their loans," another BB senior official said, adding that there is no point in expanding credit by borrowing from the inter-bank call money market.
"We've discussed the issues with the banks as precautionary measures to minimise their credit risks through strengthening our supervision for ensuring quality of loans," the BB official said.
The banks have been asked to refrain from aggressive banking and improve efficiency by minimising their CDR, he added.
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