Although Sonali Bank PLC is comparatively well-positioned among state-owned commercial banks, the government is unwilling to settle for mere satisfaction with routine statistics or paper-based accounting changes. While the bank’s default loan ratio falling to 16.4% is viewed as positive, the Financial Institutions Division considers that figure still too high by the real standards of a healthy, efficient commercial bank. To address the bank’s structural weaknesses and permanently strengthen its financial capacity, new directives state that the era of simply reclassifying loans or artificially dressing up the books through “evergreening” is over. The Financial Institutions Division has now directed that strict monitoring, sound governance, and genuine cash recovery be given the highest priority.
The directive also calls for special attention to ensuring that Bangladesh Bank’s special “exit” facility is used for genuine loan resolution and cash recovery, rather than becoming just another way to prolong loans. Financial Institutions Division Secretary Nazma Mobarek raised these points at a recent meeting with Sonali Bank PLC’s board of directors. The meeting was intended as an open exchange between the government, the board and management on the bank’s financial and operational condition, recent progress, problems, risks, prospects and the policy support needed.
The meeting also discussed Bangladesh Bank’s special “exit” facility for recovering and resolving classified loans. The board was asked for information and its views on how many and what kinds of Sonali Bank’s classified loans could come under this facility, how many applications have been received, and how many have been resolved.
The meeting highlighted the need to increase productive investment, employment, and financing for micro, small, medium and cottage industries, noting that Sonali Bank’s loan-target achievement rate in these sectors lags behind the average for state-owned banks.
The bank was urged to leverage its large branch network, strong deposit base and presence in remote areas to increase financing for micro, small, medium and cottage industries, agriculture, women and new entrepreneurs, and other productive sectors. The goal, the meeting noted, is not simply to meet Bangladesh Bank’s targets, but to ensure the state-owned bank makes a visible contribution to employment, investment and productive economic activity.
The meeting noted that rapid loan expansion without proper vetting, monitoring and good governance can lead to rising defaults later on. It therefore emphasized assessing a borrower’s capacity, cash flow, business viability, sector selection, total group exposure and true ownership before extending credit. For large loans, it urged relying on a borrower’s real repayment capacity rather than collateral alone.
Given Sonali Bank’s size and role in the financial system, its governance should serve as a model for others to follow, the meeting noted. The board was urged to focus on strategy, policy oversight, risk management and holding management accountable, rather than becoming excessively involved in day-to-day loan administration. The board was also urged to pay attention to loan governance, risk concentration, related-party lending, the quality of large loans, internal controls, audit, compliance and future leadership development.
Alongside its large branch network, the bank has an opportunity to expand digital banking to reduce transaction costs and improve customer service. The meeting urged strengthening technology-driven capacity in government payments, pensions, social security programs, remittances, the Krishak Card, the Family Card and retail banking. This will require coordinating software with workflows, cybersecurity, data management and various other systems.
As priorities for the next 12 to 24 months, the meeting called for increasing cash recovery from defaulted and written-off loans, bringing the advance-deposit ratio to a reasonable level through quality lending, increasing financing for micro, small, medium and cottage industries, agriculture and other productive sectors, boosting sustainable profitability and cost efficiency, strengthening risk management and governance, expanding digital banking and customer service, and building the capacity to lead financial inclusion programs including the Krishak Card and Family Card.
Sonali Bank PLC Chairman Mohammad Mahbubur Rahman said the bank is taking steps to conduct its banking operations in line with the Financial Institutions Division’s directives.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report