Published: Thursday, March 14, 2013

IMF keeps an eye on steps against banking frauds

The IMF is still closely watching what actions the central bank has taken against the recent banking frauds.
The lender has asked Bangladesh Bank to further update it on specific steps being taken to recover the loans caught in various scams, including those of Hall-Mark, Bismillah Group and BASIC Bank.
A team of the International Monetary Fund will start reviewing from March 20 the progress in the reform programmes under the conditions tagged with the lender’s $1 billion credit.
For its second such review, the organisation has sent a questionnaire to the BB and different ministries on various matters. Also in its first review last year, the IMF wanted to know what actions the central bank took against the banking frauds.
The IMF also inquired about the central bank’s monitoring system over the authorised dealer branches and large loans.
A BB investigation last year found that the Hall-Mark Group and some other businesses swindled around Tk 3,557 crore from Sonali Bank showing fake documents. Of the amount, Hall-Mark alone embezzled Tk 2,626 crore.
Another nondescript firm, Bismillah Group, took away around Tk 1,100 crore from some banks.
The central bank’s probe also unearthed various irregularities in BASIC Bank.
The amount of default loans in BASIC Bank soared by 184 percent to Tk 706 crore in December last year, from Tk 248 crore in the same month in the previous year.
In four state banks, the amount of such bad loans increased by 135 percent and stood at Tk 21,614 crore in December 2012, compared to a year ago.
The global lender in a report released on Tuesday said Bangladesh’s state banks have come under renewed stress in 2012.
The four largest state banks account for about a quarter of the banking assets and about two-fifths of all bank branches.
A slowdown in economic activities, competition from other banks, and weak internal governance are weighing on these banks, following earlier corporatisation efforts, which initially yielded some improvements in their financial performance, the report said.
The recent financial frauds also point to need for stronger oversight, internal controls and risk management, it said.
The state banks’ asset quality deteriorated in 2012, reversing improvements made in 2011.
Nonperforming loans (NPLs) accounted for nearly a fifth of the outstanding loans, the amount being double the banking sector average.
The IMF said the recovery of problem loans remains low and loan provisioning for NPLs is inadequate.
Asset quality in the state banks is expected to worsen considerably once the new and tighter classification and provisioning standards come into full effect, and fraud related loans are classified, it said.