Also available in Bangla Since 1990, the World Bank has been assisting the Government of Bangladesh to create a more efficient banking system that ensures credit reaches the productive sectors of the economy, a key factor in ensuring the country’s continued development. To this end, GOB has committed itself to the process of reforming the four National Commercial Banks (NCBs) Sonali Bank, Agrani Bank, Janata Bank, and Rupali Bank Limited. Rupali Bank is on its way to being privatized but the reform process in all four NCBs is challenging and new efforts are needed to ensure success. The NCBs were created to meet the financing needs of the country and have had to satisfy many differing goals, not only that of their own commercial well being. As a result, they have a high level of non-performing loans that are not fully provisioned as per Bangladesh Bank guidelines. The provision shortfall when applied to the meager capital base of the NCBs result in substantial negative net worth which potentially becomes the fiscal liability of the Government. To correct this situation, the government has adopted a reform strategy aimed at: (i) stemming the flow of nonperforming loans through a strengthening of bank management; and (ii) developing and implementing bank-by-bank strategies to resolve the longstanding problems of these banks. As part of this program, GOB requested the World Bank for assistance in reforming these institutions. Based on the NCB Resolution Strategies of the Government, the World Bank is providing support through the Enterprise Growth and Bank Modernization Project which was approved in June 2004. The Enterprise Growth and Bank Modernization Project provides US$250 million of IDA funds to finance, among several other activities, the engagement of reputable international firms to privatize one of the four NCBs (Rupali Bank Ltd., which accounts for 6 percent of total banking system assets) immediately, and to provide management support for the other three NCBs (Sonali, Janata, and Agrani) to restructure them prior to privatization. Accordingly, four international firms have been hired to assist the four NCBs. In order to ensure that the consultants in the four NCBs achieve their objectives, the World Bank carried out three Supervision Missions in 2005, and visited Bangladesh again during January and March 2006. The last mission confirmed the findings of its previous missions. So far, the goals of resolving governance problems, speeding up loan recoveries, and improving operational efficiency through staff and branch rationalization have not been achieved. In order to reach the goals the mission suggested that the Finance Ministry: • Provide sufficient flexibility to the NCB management in human resources policies so that rationalization of staff, improvement in work processes, and the introduction of new processes such as IT and computerization, can be implemented.
• Delegate sufficient powers to the Managing Directors (MDs) of the NCBs so that they can implement the recommendations to improve operational efficiencies. At the same time, the MDs should be made responsible for achieving specific and monitorable performance indicators.
• Reconstitute the NCB Boards to include at least two Directors with skill and experience in banking, accounting, and business.
• Make up the losses of the NCBs, caused by directed lending to State Owned Enterprises, from the budget. The mission was pleased to note that the Sales Advisor to Rupali Bank successfully arranged the road shows for the sale of that bank. Ten expressions of interest (EOIs) have been received from potential investors in Oman, the Netherlands, Saudi Arabia, Malaysia, India, and the UK, as well as from two investors groups in Bangladesh. It is expected that the evaluation of the proposals, negotiation and closing of the deal will be completed by the end of September 2006. April 2006
------------------------------------------------------------------------------------------------------------------------------------------------- Contacts:
Rehnuma Amin (8802) 815-9015, Ext 4136
E-mail:Â ramin1@worldbank.org For more information on the World Bank in Bangladesh, please visit :
www.worldbank.org.bd & www.worldbank.org  Â
Â
|
RSS