BB Review
Janata Bank fares badly in bad loan recovery
Growth in loans stands at 2.82pc in January-June
Star Business Report
Janata Bank (JB) has fared badly in recovery and reduction of bad loans during the first half of the calendar year, though its performance in achieving other criteria set in a MoU with the central bank has been marked quite satisfactory, according to a Bangladesh Bank (BB) review.The memorandum of understanding (MoU) signed between JB and Bangladesh Bank has made limited the growth in total outstanding loans and advances of JB to five percent. During the January-June period of 2006, such growth of the bank stood at 2.82 percent, the BB review found. Describing the JB's cash recovery against default loans as disappointing, the BB said although the recovery rate for the nationalised commercial bank (NCB) was set at Tk 25 crore from the top 20 defaulters only by December 2006, the bank showed a 0.4 percent recovery in the first six months this year realising only Tk 10 lakh bad loan. As on June 2006, the total classified loan of the bank stood at Tk 1754 crore, of which the bank was supposed to recover Tk 150 crore in accordance with the MoU. But the bank has been able to recover only Tk 52 crore, showing a 35 percent success in its yearly target. The central bank suggested that the JB should accelerate the pace of its recovery rate to achieve 100 percent target. Janata Bank sources, however, said the bank's target would not be achieved overnight, expecting a near-future improvement in the situation with regard to compliance with the BB instruction. Reduction in operation expenses by 5 percent on the JB's part was also agreed upon in the MoU. The central bank instructed this bank not to cross its total operation cost Tk 348.39 crore in 2006, but the bank in the six months spent 53 percent of its yearly target that stands at Tk 184.64 crore. Janata Bank sources said the bank spent most of the operational cost for staff salary. It is not possible to reduce the staff salary, though the bank is trying to cut other expenses gradually, the sources added. The cost of deposit of the bank, however, increased. As on June 2006, the cost of deposit stood at 4.28 percent, which was 3.73 percent by the end of last year. Janata Bank sources attributed the increase in loan and deposit interests to the central bank's tight monetary policy. The NCB has been successful in achieving its target of collecting deposit in the first six months of the year. With the target of Tk 17582 crore, it collected Tk 17545.36 crore, which is almost cent percent (99.79) of its target. In disbursing loans and advances, the bank achieved 98.78 percent of its target during the first six months of the year. The bank's most glaring success in the last six months was that it made a Tk 198.03 crore profit, which is 54.25 percent of its target.
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