International Chamber of Commerce, Bangladesh (ICCB) President Mahbubur Rahman has said non-performing loans (NPL) are impacting capital adequacy of the banking sector.
He noted that the capital adequacy ratio (CAR) of banks, as of June, stood at 10 percent, down from 10.11 percent a quarter earlier.
The ICCB leader said capital adequacy is the primary indicator of the banks' financial fitness and stability. "Banks are required to keep at least 11.81% capital adequacy ratio (CAR) which determines the adequacy of banks' capital keeping in their risk exposures."
Rahman was addressing at the closing ceremony of ICC workshop on Importance of Compliance in Trade Finance at a city hotel on Sunday, said a press release on Monday.
NPL is one of the issues that is impacting capital adequacy of the industry specially the eight state-owned commercial and specialized banks.
For decades, state-owned banks have been the prime leader to the large corporate borrowers particularly in the industrial sector of the economy, mentioned Rahman.
Since 2009, the government has injected Tk 14,505 crore into the state owned banks but they are yet to show any sign of strengthening their capital base.
On top of this of the total loan banking sector loan amounted to Tk 7,527.30 billion, of which Tk 803.07 billion or 10.67 per cent was bad debt.
And if restructured or rescheduled loans were included, NPL in the banking sector goes up to 17 percent of total outstanding loans, he added.
Rahman observed that until now, only limited action has been taken to penalize defaulters, improve risk management and strengthen bank management.
To tackle the sector's deep-rooted problems of corruption and poor risk practices further efforts needed. Bangladesh Bank must ensure following of regulatory measures by the commercial banks, he urged.
ICC Bangladesh Banking Commission Chairman & CEO, Bangladesh International Arbitration Centre (BIAC) Muhammad A. (Rumee) Ali said the non-compliance in trade financing risk is having an impact in Bangladesh's overall risk rating.
In fact, in Bangladesh it raises the cost of accessing trade finance product in International Market.
Therefore training like this must increase the efficiency of the concerned bank officials, he added.
Helal Ahmed Chowdhury, Supernumerary Professor, BIBM & Former Managing Director, Pubali Bank Ltd thanked ICC Bangladesh for continuously arranging workshops for the bankers both at home and abroad.
Such program allows the bankers to interact with their colleagues and learn from the experienced speakers on various issues related to banking operations, in particular international trade finance.
He opined that all the banks including the Bangladesh Bank should have appropriate yearly allocations for training their officials so that they can attend such workshop/training of international standard.
He said risk management and compliance are more important in the financial industry than ever before. For us, they are also part of building genuine relationships with our customers.
ICC Bangladesh Secretary General Ataur Rahman also spoke on the occasion. Sudhakar Sanjeevi, Senior Officer, Internal Control Department, Rakbank, UAE conducted the workshop.
A total of 103 participants attended the workshop from 30 banks.
NPLs impacting capital adequacy of banking sector: ICCB